Corporations and Business Structure

Running Head: BUSINESS AND CORPORATION LAW 0
Corporations and Business Structure
4/7/2019
Business and Corporate Law
Student’s Name

Corporation and Business Structure
1
Contents
Part A...............................................................................................................................................2
Part B...............................................................................................................................................3
Part C...............................................................................................................................................5
Part D...............................................................................................................................................7

Corporation and Business Structure
2
Part A
Mainly three types of business structures are available to people namely sole traders, partnership
firm, and proprietary companies. These structures have their own advantages and limitations,
different setup and administrative cost. Starting from sole traders, this is a low-cost structure and
very few reporting requirements involved in the same. One may become a sole trader by
registering the business name. Further one may apply for Australian Business number1. All the
administrative burden of such business lies with on single person who is the owner of the
business. There is no hard-core annual compliance in cases of sole traders and therefore
administration is easy. Another form is a partnership. This is also an easy structure. A
partnership business must make an application to get ABN. In addition to this, the same is also
requires to get a separate Tax file number for its business. As profits of the firm get divided
among partners and become their income, therefore the firm is not required to pay separate
income tax. Further, if the annual turnover of the firm is $75,000 or more then a partnership firm
will be required to be registered for GST2. Annual compliance is also a burden on the partnership
firm. A firm is required to prepare and submit a Tax return to Australian Taxation Officer every
year. The administrative burden of the firm is on all the active partners of the firm3.
At last, the third type of business structure is the Proprietorship Company. This structure has
much cost of set up. Promoters need to get registered their company with ASIC. In Australia, the
setup cost for a proprietorship company is $4884. Further, companies are required to have a
1 Abr.gov.au, Sole trader (Web Page) <https://abr.gov.au/For-Business,-Super-funds---Charities/Applying-for-an-
ABN/ABN-entitlement/Sole-trader/>
2 Philip McCouat, Australian Master GST Guide, 2011, 12th ed (CCH Australia Limited, 2010) 46.
3 Ato.gov.au, Partnership (Web Page) < https://www.ato.gov.au/Business/Starting-your-own-business/Before-you-
get-started/Choosing-your-business-structure/Partnership/>
4 Business.gov.au, What are the set-up steps and costs? (Web Page) < https://www.business.gov.au/change-and-
growth/restructuring/sole-trader-to-a-company/difference-between-a-sole-trader-and-a-company/what-are-the-set-
up-steps-and-costs>

Corporation and Business Structure
3
separate bank account, which is subject to bank charges and interest. The administrative burden
lies with the directors of the company. A company has to pay director fee as well which cost
more to this business. In this manner, this would not be wrong to state that the company is the
most costly business structure whereas a sole trader is the cheapest one.
Part B
Firstly, to say, a partnership firm has no separate identity from its partners5. This is the reason
that partners have unlimited liability for the debts of the firm. A partner of the firm has an
agency relationship with partners as well as with the firm. It means he/she act on behalf of the
firm and other partners. In this manner, a partner has the authority to develop any contract with
the third party on behalf of the firm. This authority may be expressed as well as implied
authority. The rights and liability of the partners are regulated by partnership agreement, which
may be developed in oral as well as in written mode. A partnership agreement is an internal
document and a third party does not have access to the same. An outsider who deals with the
firm thinks that partners have enough authority to enter into an agreement and law secure the
right of third parties in this manner. According to the section 9 of Partnership Act 19586 when
partners do act beyond their given authority, the right of the third party remains secure and the
same can held the firm as well as other partners liable for the same. The reason behind the same
is that the third party cannot check the level of authority of a partner when the transaction is
related to the ordinary course of business.
Nevertheless, it is also necessary to state that a third party would have no right against a firm or
other partners when the same has knowledge about less or no authority of the partners.
5 Lucy Jones, Introduction to Business Law (Oxford University Press, 2017) 521.
6 Partnership Act 1958 (Vic)