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Q. 1: What are the different types of business (on the basis of ownership) in Australia?

A company is a legal entity created by law and endowed (Creation) with perpetual (ever lasting) succession. Any entity engaging in business such as proprietorship, partnership, or corporation can be called Company. Limited liability companies These companies have the word Limited or the abbreviation Ltd at the end of their name. The word limited refers to the fact that the liability of members is limited. Companies limited by shares This is the most common form of company with members (shareholders) liable to the extent of the amount (if any) unpaid on their shares. Quite often when a company issues shares, members pay for them in full on application. Proprietary companies This type of company must have a share capital. The Corporations Act requires it to have only one member and one director. It may have no more than 50 non-employee share-holders. The word Proprietary or the abbreviation Pty must appear as part of its name. The Corporations Act attributes a number of advantages to this type of company e.g.: - it need not hold an annual general meeting (AGM) - it can pass resolutions informally without holding a meeting. Proprietary companies can be either large or small. Public companies The Corporations Act defines a public company as one other than a proprietary company. Therefore, should a company fail the proprietary company test it becomes a public company. Public companies may or may not be listed on the stock exchange. A public company whose shares are quoted on the Australian Stock Exchange (ASX) is referred to as a listed public company.

Q.3. Distinguish between Proprietary Company and Public Company. Find some example
Proprietary companies (no more than 50 non-employee shareholders) 1 Limited by shares 98.2% 3 Unlimited with share capital Public companies

(all non-proprietary companies: s9 definition of public company) 1 Limited by shares 0.7% 2 Limited by guarantee 3 Unlimited with share capital 4 No liability company (mining only) 0.09%

A company is a legal entity created by law and endowed (Creation) with perpetual (ever lasting) succession. Any entity engaging in business such as proprietorship, partnership, or corporation can be called Company. Separate legal entity Sole traders and partnerships are unincorporated businesses. The owner(s) and their business are, for all intents and purposes, one and the same. A company can sue and be sued in its own name, and generally speaking, the owners (members/shareholders) are not personally liable for the acts of the company. Created by law In Australia, companies are registered with the Australian Securities and Investments Commission (ASIC). The Commonwealth legislation underpinning Australian company law is: (a) the Corporations Act 2001 (b) the ASIC Act 2001.

Perpetual succession Once registered with the ASIC, a company becomes a legal entity separate and distinct from its members. The owners of a company are referred to as its members. In the case of companies that issue shares, the members are called shareholders. A company will continue to exist despite changes in its membership. People buy and sell shares in companies every day and the legal status of these companies is unaffected by the changes in ownership.

Distinguish between large and small proprietary company.

Large proprietary companies Under sec 45A(3) of the Corporations Act 2001, large proprietary companies are those which satisfy two of the following tests: - consolidated gross operating revenue is $25 million or more - consolidated gross assets is $12.5 million or more - the company and the entity it controls have 50 or more employees

Large proprietary companies are required to prepare financial reports These financial reports are to be prepared in accordance with AASB accounting standards where such companies are reporting entities Small proprietary companies These proprietary companies are those which are not large proprietary companies Under certain conditions found in sec 292(2) of the Corporations Act 2001, small proprietary companies do not have to prepare financial reports

Large corporations could not have grown to their present size without being able to find innovative ways to raise capital to finance expansion. Corporations have five primary methods for obtaining that money. Issuing Bonds. A bond is a written promise to pay back a specific amount of money at a certain date or dates in the future. Selling Common Stock. If a company is in good financial health, it can raise capital by issuing common stock. Typically, investment banks help companies issue stock, agreeing to buy any new shares issued at a set price if the public refuses to buy the stock at a certain minimum price. Borrowing. Companies can also raise short-term capital -- usually to finance inventories -by getting loans from banks or other lenders. Using profits. As noted, companies also can finance their operations by retaining their earnings. Strategies concerning retained earnings vary.

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Money Shares

What is a share?
A share is simply a divided-up unit of the value of a company. If a company is worth 100 million, and there are 50 million shares in issue, then each share is worth 2 (usually listed as 200p in the money pages.) As the overall value of the company fluctuates so does the share price. Shares can, and do, go up and down in value for various reasons. However, such movements are not usually for the most obvious of reasons.

A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure , it does not become share capital.[

A company can raise capital by using the two means - Equity & Debt Equity means ownership. Everyone who owns an equity share of a company owns a part of the company. He/she can influence the decision making in the company Debt represents an obligation. The company is obliged to pay the debt provider interest on a regular basis and repay the principal on the agreed upon date. the loan provider has no say whatsoever in the decision making of the company.. The Australian Accounting Standards Board (AASB) is an Australian Government agency that develops and maintains financial reporting standards applicable to entities in the private and public sectors of the Australian economy. Also, the AASB contributes to the development of global financial reporting standards and facilitates the participation of the Australian community in global standard setting. The AASBs functions and powers are set out in the Australian Securities and Investments Commission Act 2001. The Australian Securities and Investments Commissions (ASICs) role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. The AASB uses a conceptual framework, which includes Statements of Accounting Concepts (SAC 1 Definition of the Reporting Entity and SAC 2 Objective of General Purpose Financial Reporting) developed by the former AASB and the Public Sector Accounting Standards Board (PSASB), to evaluate proposed accounting standards. International Financial Reporting Standards (IFRS) are principles-based standards, interpretations and the framework (1989)[1] adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On April 1, 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards (SICs). The IASB has continued to develop standards calling the new standards IFRS.

Other components of the Conceptual Framework project have concluded that the objective of financial reporting is to provide financial information about the reporting entity that is useful to present and potential investors, lenders and other creditors in making decisions in their capacity as capital providers. To build on that principle, the Boards consider that it would be useful for the Conceptual Framework to broadly describe (rather than precisely define) what are the defining characteristics of a reporting entity. The DP proposes that a reporting entity should be described as a circumscribed area of business activities of interest to present and potential equity investors, lenders and other capital providers. It also suggests that a reporting entity should not be limited to business activities that are structured as legal entities so that sole proprietorships, partnerships, associations and groups of entities would fall within this description.

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