Choosing the Best Business Structure for Desklib: Sole Trading, Partnership or Company

Running head: BUSINESS LAW
Business law
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Answer 1
An appropriate business structure is the fundamental step of setting up a business activity.
In Australia business activities can be conducted by using business structures of sole trading,
partnership and company. There various form of business structures have different features and
characteristics associated with them. These features may be beneficial or detrimental to people
planning to start business operations based on their needs and preference. The distinct feature of
every business structure allows them to have their own general advantages and disadvantages
(Kubasek et al. 2015). The purpose of this section is the paper discusses the nature, advantages
and disadvantages of the three business structures indentified above.
The sole trading business is also called sole proprietorship. This form of business is done
by only one person who is regarded as the sole owner of the business. When a person wishes to
chose a sole trading business they do not need to get the business registered. According to the
provisions of common law this business would be considered as having no distinct identity in
itself. The owner and the business would be treated as the same entity before law. The business
does need to have any form of registration to be operative. This saves time and cost on the part of
the business owners. As the business is only run by a single person, the owner is supreme
command over the functioning of the business. In the same way, the liability of the person who is
carrying out the business includes all liabilities which have been incurred in the course of
business. There is no limitation of liability or any form of distinction between the liabilities of
the owner and the liabilities of the business (Beatty, Samuelson and Abril 2018). The advantages
and disadvantages of the sole trading business have been outlined below

2BUSINESS LAW
Advantages- The business does need to have any form of registration to be operative.
This saves time and cost on the part of the business owners. As the business is only run by a
single person, the owner is supreme command over the functioning of the business. The business
is easy to form and operate.
Disadvantages - There is no limitation of liability or any form of distinction between the
liabilities of the owner and the liabilities of the business. This means that the owner is personally
liable. It is difficult to expand this form of business due to limited financial resources. The Tax
paid by this business may be the highest as the liability of the owner and the business is same
and they may be charged under the highest rate of tax slab (Davidson, Forsythe and Knowles
2015).
Partnership have a few similar features like a sole trading but is distinct than such
business in various ways. A partnership is can only be started if the numbers of business owners
are two or more and limited to 20. The Maximum number is subjected to few exceptions. It is
initiated when the required numbers of people carry out business in common for earning profit.
The feature of unlimited liability and no registration is same for a partnership and sole trading. It
also does not require registration and its owners can be personally liable for business debts. In
addition to such features the partners are liable “jointly and severally”. This means they are
bound by the actions of the other partners. They act as the agent and the principal of the business
at the same time. It has no separate legal entity (Clarkson, Miller and Cross 2014).
Advantages- The business does need to have any form of registration to be operative.
This saves time and cost on the part of the business owners. The partners are aided financially as

3BUSINESS LAW
well as through skills provided by other partners. Level of compliance with law is less as
compared to business.
Disadvantages- The tax liability of the partnership business is also maximum in the same
way as sole trading. The partners are liable jointly and severally which signifies that they may
be subjected to losses and be liable for the deeds which have done by the other partners in the
course of business. They are also likely to be liable on a personal level as they are not protected
from limited liability provisions. It ends with the death of a partner or when a partner leaves.
Company is vastly different as compared to the other two business structures. One of its
most defining features is that it is a separate legal entity. The law sees the company as a different
person than its owners. It is an artificial legal person on its own and has the capacity of owning
assets and having its own liabilities. This form of business structure provides protection of
limited liability to owners. The feature limits the liability of the owners to the investment made
by them. The owners are not mandatorily required to manage the affairs. The company requires
registration and enjoy perpetual existence (Glover and Doss 2017).
Advantages-
 Limited liability protects personal assets
 Separate management allows for more efficient managers
 Perpetual existence does not make it come to an end with the death of a owner
 Owners are not liable jointly and severally
 Tax is fixed at 30% for large corporations and 27.5% for smaller businesses
 Easy share transferability
Disadvantages-