Business Partnership Assignment 2022

Quot as per 1259375_Plagiarism free Client need ppt slides with notes instead of video script

Running head: ASSIGNMENT 1
ASSIGNMENT 1
Name of the Student
Name of the University
Author Note

1ASSIGNMENT 1
Part A: Written Report on Partnership and Company form of Business Structure
The following report shall discuss the important aspects of setting and running a
Partnership and a Company form of business structure and various information about the
operational heads of the two types of business structure.
Cost, Administrative and Regulatory burden of setting up and running Partnership and
Company
Partnership
In a general partnership, the partners shall have the equal burden to carry the cost of
setting up the business along with carrying the administrative and regulatory works for the
business, unless otherwise agreed and mentioned in the partnership agreement or deed. The
cost of setting up the business starts with acquiring an Australian Business Number (ABN)
and then subsequently registering it with the Director of the Consumer Affairs Victoria
(CAV) in case of limited and incorporated limited partnership1. However, a formal
partnership agreement and registration of a general partnership is common but not
mandatory. A partnership has its own Tax File Number (TFN) along with the ABN in order
to lodge its tax return separately for the ATO to assess it. The partners shall be liable to pay
income tax individually, out of the profit incurred from the business. The partnership shall be
liable to file Good and Services Tax (GST) if and when the turnover crosses $75,0002.
In case the partners plan to register the business, they shall be liable to lodge it before
the Director of the CAV. To register, the specific number of partners must first be
determined. There must a consensus between the partners in regard to their investment,
liability, profit sharing proportion, dispute resolution methods and method of dissolving the
1 Partnership Act 1958, s 54(1).
2"Partnership", Business.Vic.Gov.Au (Webpage, 2020)
<https://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership>.

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partnership, which will be subsequently mentioned in the partnership agreement3. Checking
the name of the partnership not to be clashing with another registered trademark and then
registering the business before the CAV. Lastly, the partners need to apply for necessary
permission and licence along with the appropriate insurance for the business. Post-
registration, it needs to mention ‘A limited partnership’ next to the name of the partnership4.
Company
A Company has a separate legal entity, which could be private, public or even ‘one-
person company’ as discussed in the Corporations Act 20015. It is a more complex as well as
expensive business structure in terms of registration and operation, for it involves high
operation cost. The revenue earned in the course of business belongs to the company and the
directors and shareholders draws salary or remuneration on a regular interval. Like all other
businesses, a company is also supposed to have ABN and TFN to operate as a legal entity.
The company is required to file annual tax returns with the ATO6. It also requires the
directors and shareholders to complete an annual review of the company and pay an annual
review fee, along with giving declaration of solvency, every year. A company business
structure gives a wider scope to incur financial help from various financial institutions,
without a strict loan or mortgage scheme. It is also open to a wider access to capital, in case
of a public company. A company must register for GST if its turnover is over $75,000, while
it is $150,000 for non-profit organisations7.
3 "Setting Up A Business Structure | ASIC - Australian Securities And Investments
Commission", Asic.Gov.Au (Webpage, 2020) <https://asic.gov.au/for-business/small-business/starting-a-small-
business/setting-up-a-business-structure/>.
4"Types Of Limited Partnership", Consumer.Vic.Gov.Au (Webpage, 2020)
<https://www.consumer.vic.gov.au/licensing-and-registration/limited-partnerships/what-is-a-limited-
partnership>.
5 Corporations Act 2001 (Cth)
6 "Company", Business.Vic.Gov.Au (Webpage, 2020)
<https://www.business.vic.gov.au/setting-up-a-business/business-structure/company>
7 Ibid.

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In terms of administration, the directors have certain legal and reporting duties
towards the company as per the Corporations Act 2001 and the regulatory bodies, like
keeping financial records, giving updates to the ASIC within 28 days in case there are
changes in the company details, complying with laws and regulations as set under the
Corporations Act as well as by regulatory bodies8.
To register a company, the proprietor must pay the registration fees to the ASIC along
with other necessary details like name of the members, directors, name of the company,
address of the registered office, nature of business, procedure of dispute settlement, way of
dissolving or winding up the company, et cetera. A private or proprietary company shall put
‘Pty Ltd’ next to its name while a public company that sells its share to public for generating
capital shall put ‘Ltd’ only next to its name. A company could be governed by replaceable
rules held in the Corporations Act or by its own Constitution or sometimes both.
Potential Liability to Third Parties
Partnership
A partnership involves unlimited liability of the partners. It simply means that the
partners of the business shall be held liable for the debt and losses of the partnership. They
shall be held collectively as well as individually responsible for each and every transaction
related to the firm. This is why the personal assets of partners are often affected, in order to
pay off the debts and losses owed to a third party9.
The partners are not the employee of the partnership, they are rather agents of the firm
who work for each other, and are answerable and liable for their actions. Thereby, every
8 "Company", Business.Vic.Gov.Au (Webpage, 2020)
<https://www.business.vic.gov.au/setting-up-a-business/business-structure/company>
9 "Types Of Limited Partnership", Consumer.Vic.Gov.Au (Webpage, 2020)
https://www.consumer.vic.gov.au/licensing-and-registration/limited-partnerships/what-is-a-limited-partnership

4ASSIGNMENT 1
partner could be held liable for the wrongful action of another partner. This is more of a
disadvantage of the partnership form of business structure.
Company
A company is a separate legal entity that has a personality of its own, thereby not
involving much risk for its shareholders and directors. It bears its own debts and losses,
thereby not affecting the personal assets of the shareholders or directors10. The liability of the
shareholders is limited to the number of shares held by them only, thereby causing them a
loss to a certain limit. Additionally, a wrongful action of one shareholder or director does not
make others liable. Therefore, it is known as the ‘limited liability’ of a company11. However,
in case of extreme debt or fraudulence by the company, it becomes necessary for the
company to lift the corporate veil and reveal the person liable for incurring such debt.
Importance and Differences of the Fiduciary Duties in Partnership and Company
Fiduciary duty
A fiduciary duty refers to the legal obligation of a person towards another, acting for
the best interest of such other person. The person having the obligation is called the fiduciary
which means someone who is entrusted to care for another, mostly in terms of trust or
money12. In a partnership, the partners are the fiduciaries to each other, thereby holding a
fiduciary duty to work for the best interest of one another so that the business does not face a
loss or debt or any other adversities. In a company, the directors are the fiduciaries of the
company who are bound to act in the best interest of the company13.
10 "Starting A Company | ASIC - Australian Securities And Investments Commission", Asic.Gov.Au (Webpage,
2020) <https://asic.gov.au/for-business/small-business/starting-a-company/>
11 Ibid.
12 Boatright, John R. "Fiduciary duty." (2015) Wiley Encyclopedia of Management 1-2.
13 Bruner, Christopher M. "Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It Matter." (2013)
48 Wake Forest L. Rev. 1027.

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Duties of Partners and Directors
The partners are not the employee of the partnership, they are rather agents of the firm
who work for each other, and are answerable and liable for their actions. Thereby, every
partner could be held liable for the wrongful action of another partner. Along with filing
income tax return on the firm’s name and paying income tax on the share of profit that they
derived from the firm’s turnover, the partners are liable to arrange for his own superannuation
fund as they are not an employee of the business. It is not only their duty but it is their
liability also, to work for the best interest of the partnership as otherwise it would create
collective as well as individual liability for all the partners14. They shall carry out the
necessary duties of an employer towards the people who have been recruited as the
employees of the firm, which includes firm wage, reasonable holidays and protection from
any form of discrimination and harassment in the course of employment.
Directors, on the other hand, are vested with several fiduciary duties towards the
company as held under sections 180-183 and certain other provisions of the Corporations
Act. They are:
 To exhibit care and diligence towards the company15
 To act in good faith for the best interest of the company16
 Not to make improper use of their positions as directors 17
 Not to make use of confidential information for an improper purpose18
 Not to do Insolvent Trading19
 To maintain financial records and financial reporting20
14 "Partnership", Business.Vic.Gov.Au (Webpage, 2020)
https://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership.
15 Corporations Act 2001 (Cth), s 180
16 Corporations Act 2001 (Cth), s 181
17 Corporations Act 2001 (Cth), s 182
18 Corporations Act 2001 (Cth), s 183
19 Corporations Act 2001 (Cth), s 588G
20 Corporations Act 2001 (Cth), s 344

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 Must disclose their personal interest attached to a business transaction21
 Must lodge necessary information relating to changes made to the company with the
ASIC22
 Must disclose information related to the company’s condition that may have an effect
on its market share price, in case of a listed company23.
Differences
The most substantial difference between a partnership and a company lies in their
different structural form and the liability of their operation heads. A partnership needs at least
two people, while a company could even be run by a single person as a ‘one-person
company’. Partnerships are cheaper in terms of formation, but forming a company is
expensive and complex. A company is a separate legal entity, while partners are the identity
of the firm. Partners bear unlimited liability in case of general partnership, while shareholders
have a limited liability towards company debt. It is easier to dissolve a partnership by
dividing the assets as per the contribution of the partners, however, it is a complex process to
dissolve or wind up a company.
Recommendation
For the purpose of recommending the most suitable business structure for Greta,
Mariana and Ted, the nature of their business and the relationship that they share is being
taken into consideration.
Greta, Mariana and Ted are brothers and sisters who want to open a business for
supplying imported Russian food to restaurants in Melbourne as they think Russian caviar
and vodka is in high demand these days. From the above-mentioned information, it could be
21 Corporations Act 2001 (Cth), s 205G
22 Corporations Act 2001 (Cth), s 188
23 Corporations Act 2001 (Cth), s 674

7ASSIGNMENT 1
assumed that they are planning to open a small-scale business that would involve supplying a
handful items to the restaurants in Melbourne, which would not require a large or complex set
up. More so, their relationship as brother and sister allows them to opt for a simple business
structure that would not require external influence or review, unlike that of a company. Due
to the existing trust and dependence in their proximate relationship as siblings, it is possible
for them to depend on each other in terms of business responsibilities and dutiful
transactions, thereby minimising the chance of incurring liability to third parties to a great
extent24.
Therefore, a partnership form of business structure should be most suitable for them.
They could either try a general partnership or may opt for a limited partnership where at least
one of them holds the unlimited liability and the others could enjoy limited liability for the
debt of the business. Mariana and Ted could however be the two unlimited partners, while
Greta being skeptical, could become a limited liability partner who shall not be held for the
entire debt of the firm; however, she shall not be able to take part in the day to day operation
of the firm.
24 Hodge, Graeme, and Carsten Greve. "Contemporary public–private partnership: Towards a global research
agenda." (2018) 34.1 Financial accountability & management 3-16.

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BIBLIOGRAPHY
Books/Journals
Boatright, John R. "Fiduciary duty." (2015) Wiley Encyclopedia of Management 1-2
Bruner, Christopher M. "Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It
Matter." (2013) 48 Wake Forest L. Rev. 1027
Hodge, Graeme, and Carsten Greve. "Contemporary public–private partnership: Towards a
global research agenda." (2018) 34.1 Financial accountability & management 3-16
Legislations
Corporations Act 2001 (Cth)
Partnership Act 1958 (Vic)
Official Government Websites
"Company", Business.Vic.Gov.Au (Webpage, 2020)
<https://www.business.vic.gov.au/setting-up-a-business/business-structure/company>
"General Duties Of Directors", Aicd.Companydirectors.Com.Au (Webpage, 2020)
<https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director-
tools/pdf/05446-6-2-duties-directors_general-duties-directors_a4-web.ashx>
"Partnership", Business.Vic.Gov.Au (Webpage, 2020)
https://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership
"Setting Up A Business Structure | ASIC - Australian Securities And Investments
Commission", Asic.Gov.Au (Webpage, 2020) https://asic.gov.au/for-business/small-
business/starting-a-small-business/setting-up-a-business-structure/

9ASSIGNMENT 1
"Starting A Company | ASIC - Australian Securities And Investments
Commission", Asic.Gov.Au (Webpage, 2020) <https://asic.gov.au/for-business/small-
business/starting-a-company/>
"Types Of Limited Partnership", Consumer.Vic.Gov.Au (Webpage, 2020)
https://www.consumer.vic.gov.au/licensing-and-registration/limited-partnerships/what-is-a-
limited-partnership