Assessment ID and Code Question and Answer 2022

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Question 1: Advise DJ_PP and Khan Chan in relation to a suitable business structure to
operate such a high-risk business.
You must support your answer with legal authority.
DJ Phunky Pham and club promotor Khan Chan want to establish an own nightclub business.
However, such types of businesses require several licenses and legal requirements to operate.
It also produces different risks as per a former club owner like higher implementation cost,
liquor licenses, music license, rent, staff salary, and location. Hence, it is necessary to
understand legal aspects before even company registration as per the corporation law 2001.
Let’s understand the procedure step by step. The business structure is the first step in which
company size and type will be decided. Further, it should consider separate legal entity
doctrine, which will refer to the company as an authorized person (Koenig 2017). The
Corporate Act 2001 legislation 124 state that “a company will have legal capacity and power
posing as an individual in jurisdiction inside and outside for shares, debts, grant options, and
security interest” (Federal Register of Legislation 2017). Furthermore, legal aspects of
structure for more individuals are also essential. Hence, for the nightclub business, a general
partnership between DJ Phunky Pham and Khan Chan is the first suggestion. A general
partnership is a form of legal structure that offers collaboration between two people who
know, trust, and agree to work jointly (Lupulescu 2017). Thus, this partnership is
recommended because of partners involved will operate nightclub and share the
responsibility to partnership debts and liability (Korchak 2017).
However, DJ and Khan must concern for personal liability because liability is considered
personally in case of debts, issues, and obligations (Entrepreneur Staff., n.d.). Hence to avoid
this liability issue second step is the implementation of the partnership agreement. According
to Corporation Act 2001, legislation 127 states that the execution of documents by the
company itself should be company policy. It states that “a common seal could execute a
document under witnesses such as two directors of that company” (Federal Register of
Legislation 2017). This will definitely provide a record for agreement between two parties,
DJ and Khan, in a legal manner.
The third step for nightclub business partners will be registered into a limited liability
company to seek protection from personal liability issues. Limited Liability Company (LLC)
is a business structure in which both partners will not be responsible personally for
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nightclub’s debts from investment firms, banks, and sponsors (Mancuso 2017). Furthermore,
if in case a company shutdown authority involved will not handover their personal assets
such as money, jewelry, or house. There are three important benefits for making the
company’s registration into LLC like limited responsibilities, income tax, economic risks,
easy internal operations, and reduce investment monitoring (Molly 2017).
Additionally, limited liability partnership (LLP) is another form of safety net that protects
against business risks. The LLP offers a way so that partners’ liabilities stays as per
investment to the nightclub, whereas investment banks cannot harm personal assets or
income if the club fails (Beattie 2019). Lastly, in the case of former club owner Mel, public
liability insurance was unable to save his personal assets. Therefore, the last advice is to have
a good liability insurance policy (PLI) against business risks. As nightclubs will come in
contact with the public; therefore, insurance against lawsuits is essential. Also, the PLI policy
will cover expanse for issues like broken injuries, damage of property, and legal expenses
(Murray 2019). Hence, all the suggestions made as per the partnership business structure and
conducting risky business operations.
QUESTION 2 With reference to legal authority, analyse whether the contract between
RR and ‘Rainforests-R-Stupid Pty Ltd’ is valid in light of the receptionist’s breach of
the company constitution.
The contract is a legal binding between two parties, which offers a certain accomplishment
and price for a service. In this case, it important to analyse the breach that occurred by the
receptionist in the company — considering the decision for appointing DJ and Khan as only
single directors and shareholders. There are different rules for registration of an organization
in Australia as per the Corporation Act 2001 legislation (Cth) 114. As per this legislation, a
company can have its own constitution, one shareholder, and one director (Federal Register
of Legislation 2017). Hence, the basic requirement for the company registration by DJ and
Khan seems valid and follows the rules properly as per Australian standards.
Now, as DJ and Khan have decided to develop a company’s constitution, which is easily
customized and overruled by the rule of Corporation Act 2001, the legislation under 111J
Small Business Guide refers that, “a company does not require separate constitution however
it can follow rule in the Corporation Act while constitution is required if company want to
displace, modify and add to replaceable rules” (Federal Register of Legislation 2017). Hence,
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