Incorporated Businesses
Incorporated Businesses
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New in Stock - Preliminary Exam Business Report Samples (Band 6 Exemplar)
Private Company:
Private Company:
A business that has become incorporated (separate legal entity to owners)
Owned by between 2-50 private shareholders; typically SME / family owned firm. Shares available through private invitation only.
Has PTY LTD (Proprietary Limited) after its name.
More difficult and expensive to establish and run (legal compliance and processes also increase).
Private Company Advantages
Private Company Advantages
Limited liability for owners
Can obtain finance more easily for expansion and growth
Legal regulation protect and support business owners in event of business failure.
Can create subsidiaries to separate business activity (limiting liability of parent firm)
Private Company Disadvantages
Private Company Disadvantages
Higher cost of establishment—fees to ASIC and legal fees to draw up corporate agreement
Legal responsibilities to run a board; meet frequently, keep minutes
Double taxation (business profits treated separately to income to owners of business)
Public Company:
Public Company:
A large business that has become incorporated (separate legal entity to owners) that has made their shares available for public purchase through ASX.
This is called an Initial Public Offering (IPO) and requires the production of a prospectus - a document detailing the features and prospects of the firm to convince potential shareholders to invest.
Use of equity funds to expand operations; owned by thousands of shareholders and subject to public scrutiny.
Has LTD (Limited) after its name.
Difficult and expensive to establish and run (legal compliance and regulation very high and expensive).
Public Company Advantages
Public Company Advantages
Limited liability for owners (shareholders of the business)
Unlimited number of shareholders (access to vast pool of capital to grow business)
Easier to obtain debt finance (with so much equity to counter-balance)
Rapid growth potential with access to finance to pursue business growth.
Public Company Disadvantages
Public Company Disadvantages
High costs of establishment and access to equity finance through sharemarket
High levels of regulation and legal compliance (board operations, reporting, continuous disclosure)
Increased business transparency
Double taxation (business profits treated separately—unless business offers fully franked dividends to shareholders)
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