Introduction Business Structures in Australia

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Part A:
Written
Report

Part A: Written Report
Introduction
Australia is a nation in which the individuals have a vast array of business
structures to choose from, while starting their business. The choice of
business structure depends on the requirements of individuals starting such
business. Each business structure has unique features which makes it
attractive for some individuals and not so attractive for the others. In making
the final decision regarding which business structure to adopt, the
individuals must undertake a thorough analysis of these key features so as
to ensure that the decision undertaken by them suits their requirements,
along with being certain of the possible liabilities that come with such
decision. The broad classification of business structures includes sole trader,
partnership and company. Trust, owing to its complexities, is not a common
favourite1.
The present discussion covers the analysis of possible business structure for
the three clients Greta, Mariana and Ted based on the specific instructions
and features shared by them. Two the clients, Ted and Mariana, favour the
formation of business by opting for partnership as a choice of business.
However, the third client, Greta wants to opt for a company form of business
structure. Hence, these are the two business structures that will be explored
in this discussion.
Option of business structures
As the premises of this discussion highlighted, Australia has different
business structures, one of which is sole trader. A sole trader, as the name
suggests is one run by a single person, allowing for freedom of operations
and decision making. This however comes with unlimited liability, restricted
skill pool and limited financial sources. This structure is not suitable in the
1 Nickolas James and Timothy Thomas, Business Law (John Wiley & Sons, 2020)
pg. 1

Part A: Written Report
present context, owing to the fact that the clients are three individuals and
do not fit the requirement of a single person running the business2.
Partnership is a key form of business structure in Australia and is marked by
very unique features. Partnership is present when two or more persons come
together to run the business, with a unified goal and with a view of sharing
profits in the business. Joyce v Morrissey3 highlights the features of
partnership as a business structure. This case saw presence of business
being run for a common purpose, for sharing profits and between the
members of the band, resulting in court accepting that a partnership was
indeed present. The Australian jurisdiction has different legislation in its state
to regulate the partnerships. For instance, in South Australia, Partnership
Act, 18914 regulates the partnerships; whilst in Western Australia partnership
is regulated by Partnership Act, 18955.
The leading legislation for Victoria is Partnership Act, 19586. The definition of
partnership stated earlier is present under s5 of this act7. Upon the formation
of partnership, the different details associated with this association, including
details of capital contribution or profit sharing ratio, are covered in the
document called partnership deed. This deed brings clarity to what all has
been agreed between the partners. The need for adopting a partnership
deed is also covered under s6 of the Victorian legislation8. This legislation
also provides that all the partners have to bear the liability for the acts done
by the partners owing to the fact that the business is run with a common
purpose9.
2 Ibid
3 Joyce v Morrissey [1998] TLR 707
4 Partnership Act, 1891 (SA)
5 Partnership Act, 1895 (WA)
6 Partnership Act, 1958 (Vic)
7 Partnership Act 1958, s5
8 Partnership Act 1958, s6
9 Partnership Act 1958, s10
pg. 2