Every Day We Face Many Consumer, Financial, Legal, Business And
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Every day we face many consumer, financial, legal, business and employment choices. Business Education helps us to make informed and responsible decisions. A Business and economic systems In this part, you will understand: • business environments • the nature of systems and subsystems • production and markets • the resolution of business and economic issues. 1 Business environments Whenever you step outside your home, you interact with some type of system or business organisation. It may be the transport system, a retail business or a government department. In fact, even within your home, you can have such interaction through the Internet or on the telephone. In this chapter, you will learn how business organisations operate within community systems and how they are regulated. You will: • compare business organisations • analyse their purposes and structures • identify how businesses fit within industry types • identify and investigate the need for systems and businesses to be regulated • understand the role of regulatory bodies in Queensland and Australia. Key terms public company: business owned and operated by an unlimited number of people called shareholders. asset: item of value that a business owns and that It has limited liability, and the shares may be can be given a monetary value bought and sold on the stock exchange. business: the organised effort of individuals to quaternary industry: an industry involved in the produce and sell, for a profit, the products that transfer and process of information and knowledge satisfy individual needs and wants quinary industry: an industry that provides domestic consumer: a person who purchases goods and services, many of which were once carried out by services to satisfy needs and wants people within their own homes cooperative: a group of people who join for a raw materials: material as it exists in nature before it common interest is treated in any way export: a good or service sold to overseas countries secondary industry: an industry in which raw franchise: the buying of the rights from another materials are taken from the primary sector and business to distribute its products under its name processed into a finished or semi-finished product franchisee: an individual or organisation that sole trader: a business owned and operated by one purchases a franchise person franchisor: an individual or organisation that grants a stock exchange: the place where shares in public franchise companies are bought and sold goodwill: the value attached to the reputation of a tertiary industry: an industry that provides a service particular business for other people incorporation: the process that companies go trademark: a brand name or design that is officially through to become incorporated — that is, to registered become a registered company and a separate legal trust: a relationship in which one person (the trustee) entity holds property (the trust property) on behalf of industry: a business sector involved in similar types another (the beneficiary) of production unlimited liability: describes a situation where a legal entity: a business that has legal recognition and business owner is personally responsible for all the carries associated rights and responsibilities debts of his or her business want: thing that is not essential for survival but that limited liability: an obligation by a business owner to we would like to have pay off debts only to a limited amount in the case of business failure — usually the amount invested need: thing necessary for survival, such as water and food non-profit organisation: organisation that operates in order to provide social, educational, religious and other services, rather than to earn a profit partnership: a legal business structure that 2 to 20 people own and operate with the aim of making a profit primary industry: any industry that is involved in growing, producing or extracting natural resources private company: business owned and operated by between 2 and 50 private owners. The public cannot buy shares in a private company. profit: the money earned by a business that is in excess of costs — that is, the money left over after expenses are covered. Mathematically, it is simply the income from all sources less all costs and expenses. 1.1 Business organisations Today, consumers depend on a wide range of operate in order to provide social, educational, businesses to provide them with the endless range religious and other services rather than to earn a of goods and services they require. Without these profit. The Salvation Army and World Vision are businesses, life would be more difficult. examples. Such ‘businesses’ are called non-profit organisations. What is a business? A business is any organisation that produces and How are businesses organised? sells, for a profit, the goods and services that Businesses can be organised in five main ways. satisfy our needs and wants. Some organisations These ways are described below. A sole trader is a business that is owned and operated by one person. It is the most common type of business in Australia. A sole trader business can operate in almost any field. Usually, however, sole traders are stores, cafés, newsagents and hairdressers as well as A private company usually trades such as plumbers has between 2 and 50 private and electricians. owners called shareholders. These The sole trader receives businesses tend to be small to all the profit and suffers medium in size. Often, they are all the losses. He or she family-owned. Shares in private has unlimited liability. companies are offered only to This means he or she can those people the business wants be forced to sell personal A partnership is a business usually owned and as part-owners. This is why it is assets such as the house operated by between 2 and 20 people, called called a ‘private’ company. or car to pay for business partners. The partners sign an agreement that A private company must have debts. A sole trader records, for example, how profits and losses are the words ‘Proprietary Limited’, usually has only one to be shared, the partners’ roles and how to abbreviated to ‘Pty Ltd’, after its person’s name in its dissolve the partnership. Together they decide name. The main advantage of business name — for how best to operate the business. It is common a private company is that example, Maria’s Café. for people with similar skills — such as doctors, shareholders have limited If the business name is solicitors and dentists — to form a partnership. liability. This means that if the different from the owner’s Partnerships tend to have the names of the business cannot pay its debts, a name, the sole trader partners in the business name — for example, shareholder loses only the money must register the business Harries and Davidson Accountants. Partnerships she or he has invested in the name. have unlimited liability. business. 6 Part A: Business and economic systems KNOW AND UNDERSTAND 1 What is a business? 2 List three non-profit organisations. 3 Select the most appropriate word from the list below to complete the sentences that follow. public personal beneficiary sole trader private limited stock exchange liability unlimited two twenty A business entity with one owner is called a . This person faces liability, which means he or she can be forced to sell his or her assets to pay for the debts of the business. Partnerships normally consist of between and partners. Partnerships have unlimited . There are two types of companies, private and . A company has between 2 and 50 private shareholders. Shares in public companies are bought and sold on the . Companies have liability. In a trust, the trustee holds property on behalf of the . 4 In your notebook, complete this table to show how each of the businesses below is owned. The first A public company can have an unlimited number of one has been completed for you. shareholders. The general public may buy and sell shares in these companies. This is done through the stock Sole Partnership Private Public Trust exchange. Most public companies are large. Examples trader company company include Westfield, Billabong and Woolworths. Shareholders in public companies have limited liability. Beck’s Pty Ltd A public company must have the word ‘Limited’, abbreviated to ‘Ltd’, after its name. Beck’s Pty Ltd The Jones Family Trust M&M Communications Tyler & Kelly Tip Top Pty Ltd Tai’s Take-away CGM Ltd 5 In groups of four or five, decide what form of business ownership is appropriate for: (a) a small bicycle shop that offers personal and professional advice by the owner (b) a national retail chain that would require $589 million to establish (c) a suburban hairdresser (d) a medical clinic. PROPOSE 6 You are planning to establish the following types of business. What form of business ownership would you prefer? (a) A bicycle shop offering professional and personal advice (b) A family cattle stud specialising in breeding programs (c) A travel agency that you wish to expand to five outlets within two years (d) A national retailer that would require $467 million to establish A trust is often used to minimise taxation and preserve (e) A solicitor’s practice offering a range of legal family assets. One person (the trustee) holds property services. (the trust property) on behalf of another person (the beneficiary). 7 Business environments 1. 2 Analysing business organisations Business organisations are all designed to suit the • minimum requirement (under the law) of three particular needs of the people who establish them. directors, two of whom must live in Australia Businesses have different structures and legal • requirement to publish an annual report that responsibilities and it is important to understand clearly states its financial position. the differences, for example, between a limited lia- bility company and a private enterprise operation.