Businesses are summarized and categorized into three groups: legal entity, sector, and business activity. There are many different advantages and disadvantages in the different types of business and no one business in without its drawbacks.
Business in Australia can be separated by their legal entity (i.e. the type of ownership structure that they use). There are primarily three types of ownership strategies: the sole trader, the partnership, and the company. A business must have only one owner to classify as a sole trader. This characteristic allows a lot of flexibility within the business. Decisions can be made more efficiently, the owner is able to reap all the rewards, and it is relatively easy to set up. Another advantage on a lesser scale would be to maintain a private business environment. However, being a sole trader also has its disadvantages. Unlike partnerships or companies there is a limited source of finance and of the same time a limited source of management skills. If the business fails the owner has unlimited liability. Another disadvantage would be the unreliable amount of work that would consume the owner.
However, some of the disadvantages may be resolved by forming a partnership. A partnership is defined by two or more people trading together in order to create profit. It is a completely different legal entity to that of a sole trader. In contrast to sole tradership, a partnership allows the sharing of resources or ideas, a lighter workload for the partners, a greater (but still limited source of finance) than sole tradership and a wealth of knowledge from each partner. However it also had a few disadvantages. Similar to sole tradership, each partner has unlimited liability if the business goes bankrupt. The profits of the business must be shared between the partners, and lastly the inability of a partnership to form quick decisions.
A Company has a separate identity from its owner. It i...