Business Structure and Law Assignment

This assignment requires students to analyze and compare different business structures (company, partnership, trust, and sole trader) in the context of Australian law. Students are expected to provide detailed explanations and comparisons between these structures, including their advantages and disadvantages, as well as relevant laws and regulations that govern them. The assignment also touches on the legal system in Australia, how laws are made, and the role of government agencies such as Fair Work and Business Victoria.

Running head: BUSINESS LAW 0
Business
Law
Advantages and
Disadvantages
of Different
Business
Structures

BUSINESS LAW 1
Table of Contents
Introduction................................................................................................................................2
Business Structures in Australia.................................................................................................3
Woolworths Limited..................................................................................................................4
Comparing with Other Structures..............................................................................................5
Sole Trade..............................................................................................................................5
Partnership..............................................................................................................................6
Trust.......................................................................................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

BUSINESS LAW 2
Introduction
Australia is a parliamentary democracy, and the constitution of 1901 provides
provisions for the establishment of a federal government system in the country. The legal
system divides power between national government (Commonwealth) and six states (UTAS,
2018). The constitution distributes the law-making powers between Commonwealth and
States. The legal system in Australia is heavily influenced by the English, and the two major
sources of law include cases and legislation (Australian National University, 2018). The cases
include decision given by judges in the courts and legislation includes laws made by the
parliament. The national and state government has implemented different laws for businesses
to protect customers and to promote fair trading and competition. While starting a new
business, owners have to decide the legal structure based on which they have to comply with
different requirements. This report will analyse the legal system in Australia in context to
businesses and assesses different business structures. This report will evaluate the business
structure of Woolworths Limited and discuss its advantages and disadvantages. Further, the
report will compare the merits and limitations of different business structure and examine
how legal system affects their operations.

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Business Structures in Australia
There are four different legal structures for businesses operating in Australia.
 Sole trader: In this structure, a person is responsible for all aspects of the business. A
sole trader can hire other employees for performing business tasks, however, only
he/she is responsible for its actions. In case the business failed to repay its debts, the
court can use personal properties of the sole trader to pay such debts (Department of
Industry, Innovation and Science, 2018).
 Company: A company is created as per the provisions of Corporations Act 2001, and
it has a separate legal entity from its owners or shareholders (Department of Industry,
Innovation and Science, 2017a).
 Partnership: It is referred to an association of individuals who joined together to run
a business (Department of Industry, Innovation and Science, 2017b).
 Trust: It is referred to an arrangement whereby an entity holds income or property as
a nominal owner for the benefit of others (Department of Industry, Innovation and
Science, 2017c).
As per the legal system in Australia, businesses have to register themselves before
commencing any business activities. However, the registration requirement differs based on
the structure of the business. Businesses also have to comply with different legal
requirements such as taxation laws, fair trading regulations, employment laws, consumer
acts, the law of torts, contract law, privacy act and others (JD Supra, 2015). Based on the
structure of a business, different liabilities and obligations are required to comply by a
business relating to tax liability, asset protection, expenses, reporting and others. Businesses
are requiring assessing the legal context in which they operate and ensure that they comply
with its requirements to avoid legal consequences.
The laws in Australia are created, changed and applied by the parliament in Australia.
Firstly, a draft of the proposed law is presented to the parliament in the form of a bill.
Generally, proposed laws are presented in the parliament by the government. A bill can be
presented in either of the house (Skwirk, 2018). The ministers than discuss the bill and make
necessary changes to it and opinions from the public regarding the bill are considered as well.
After making requirement changes, the bill is presented in the parliament to be passed in
identical form by both the houses of the parliament. After passing the bill in the parliament, it

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is presented to the Governor-General for royal assent after which the bill becomes law
(Parliamentary Education Office, 2018). Businesses have to assess both old and new laws
which apply to their structure and comply with them in order to avoid legal liabilities.
Woolworths Limited
Woolworths Limited is an Australia company which was founded in 1924; the
corporation operates in retailing industry and offers its services in different parts of Australia,
New Zealand and India (Woolworths Group, 2018). It is the largest supermarket chain
situated in Australia, and its head office is situated in Bella Vista, New South Wales,
Australia. The legal structure of Woolworths Limited is a public company. Being a public
corporation, shares of Woolworths Limited are registered on Australian Securities Exchange
(ASX) and people can purchase them through ASX (Woolworths, 2018). Woolworths has to
comply with the provisions of Corporations Act 2001 and other regulations while performing
its business activities. For example, as per the tax regulations in Australia, the tax rate for
companies is 30 percent, and the company has to comply with the same (Australian Taxation
Office, 2018). It has to comply with Food Safety Act 2001 in order to ensure that food
products offered by the firm are safe and healthy to use. The company also comply with Fair
Work Act 2009 for ensuring health, welfare and safety of its employees. As per the Fair Pay
Act 2005, the firm has to provide minimum wage to its workers which is currently AU$18.29
per hour (Fair Work, 2018).
Advantages
 A company has a separate legal entity which means it can enter into contracts and
hold property under its name.
 The liability of shareholders in a company is limited, and they cannot be held
personally liable for repaying the firm’s debts.
 A corporation can sell its shares and raise capital for its operations. A public company
can list its share on Australian Securities Exchanges, and people from all across the
country can purchase its shares.
 Taxation rates for the companies are more favourable than compared to other
structures (Woellner, Barkoczy, Murphy, Evans, & Pinto, 2012).
 Corporations follow functional or hierarchy strategy in which decision-making occurs
at the senior level of management, and they control all the operations in the

BUSINESS LAW 5
organisation. It facilitates stability and efficiency in the operations. Companies take
assistance from professionals in different fields while taking decisions which improve
their effectiveness.
 Companies receive great flexibility in terms of cancelling or reducing the paid-up
capital of shares under Corporations Act 2001.
Disadvantages
 Corporations have to comply with more rules and regulations as compared to other
business structure.
 The legal structure of a company is more complex than other business structures. It is
also relatively expensive to start a new company than compared to other business
structure (Du, Bhattacharya & Sen, 2011).
 It is relatively difficult to control the operations of a corporation, and senior level
executives have to delegate their powers in order to regulate a firm properly.
 Profits distributed by a company are the form of a dividend to its shareholders is
taxable.
 The reporting requirements of a corporation are complex and also resulted in
increasing the firm’s overall operating costs.
 Directors can be held personally liable for legal obligations or debts of the company
based on the doctrine of piercing of corporate veil.
 The financial affairs of a company are public, and it has to make a public statement in
case of any major change occurred in the firm.
Comparing with Other Structures
Sole Trade
Advantages
 Sole trading business is operated by a single person whereas a number of people run a
company; therefore, the cost of operating and running a sole trading business is
considerable lower than compared to a corporation (Department of Industry,
Innovation and Science, 2017d).

BUSINESS LAW 6
 The expenses occurred while starting the business is also relatively lower in sole
trading business structure. The formation process of a company is more expensive and
longer than a sole trader.
 The privacy of a sole trader is maintained because it did not have to publish its
financial affairs. On the other hand, financial affairs of a corporation are public, and it
has to publish its books of accounts.
 It is easier to control a sole trading business because the owner is responsible for all
aspects of the business. A company follows a functional or hierarchy structure in
which decisions are taken by top-level management which is followed by
subordinates. However, it is difficult to manage subordinates if the number of
employees is high.
 The owner of a sole trading business retains all the profits of the business, except for
paying employees’ salaries, if any. In a corporation, the profit is distributed between a
number of stakeholders which include shareholders, employees, investors and others.
 Due to lack of complexity, a sole trader can take business decisions efficiently. On the
other hand, the decision-making process in companies is longer because top-level
management has to consider different opinions.
Disadvantages
 The owner of a sole trading business is personally liable for its debts and liabilities,
whereas, shareholders are liable up to the extent of the capital invested by them.
 The owner is the only investor in sole trading business, and it is considerably difficult
to raise finance. On the other hand, companies can list their shares on the stock
exchange to raise money (Department of Industry, Innovation and Science, 2017d).
 In a sole trading business, the owner has to take all business decisions, and success or
failure of the business entirely depends upon his/her decision. In a corporation, the
decisions are taken by top-level management after consulting with professionals from
different fields which reduces the risk of failure.
 Sole traders are taxed as individuals whereas corporations are taxed as a separate
entity. The tax regulations in Australia are more favourable towards companies.
Partnership
Advantages

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 The starting cost of a partnership firm is relatively lower than compared to a
corporation.
 A partnership is created by a contract between the partners which is a relatively easy
process, whereas, a corporation is registered under the Corporations Act 2001 which
is a complicated process (Business Victoria, 2015).
 In partnership, the flexibility in operation is higher than compared to a corporation.
The decisions are taken by partners through voting whereas top-level management
takes business decisions in corporations.
 Partnerships are divided into two categories; general and limited. In general
partnership, partners’ liability is unlimited whereas, in limited liability, partners’
liability is limited. The liability of both limited liable partners and shareholders are
limited, and they cannot be held personally liable.
 Partners are responsible for taking business decisions, whereas, directors take
decisions in a company after consulting with different professionals.
Disadvantages
 In a partnership, disputes between partners might lead to negatively affecting the
business. Conflicts can also lead to disagreement between the partners which might
result in dissolving the partnership. However, a corporation cannot be dissolved based
on the disagreement between directors (McKnight, 2014).
 The income of a partnership firm is taxable as per the income of partners whereas
profits of a company are taxed separated from its shareholders.
 Partnership firms face difficulty in raising capital for business expansion whereas it is
relatively easy for companies to raise capital.
Trust
Advantages
 Trusts are more flexible in operations than compared to partnerships and corporations.
 The liability of trust is limited unless the director commits insolvent trading.
Similarly, the liability of shareholders is limited as well (Rogerson Kenny, 2014).
 Trusts provide more privacy than compared to a corporation because its accounts are
not public. On the other hand, companies’ accounts are public which can be accessed
by anyone.

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Disadvantages
 The structure of trust is more complex than compared to Sole traders or partnerships.
However, the structure of corporations is more complex than a trust (Moroney, 2018).
 The income of a trust is treated as personal income of the trustee, and no tax
deductions are allowed. However, tax rates of corporations are more favourable.
 The provisions of the trust deed restrict the power of a trustee. Whereas, the
provisions of Corporations Act 2001 restrict the power of companies.

BUSINESS LAW 9
Conclusion
In conclusion, businesses have to comply with legal regulations in Australia based on
their business structure. While starting a business, owners can choose between four different
business structures in Australian which include sole trader, partnership, company and trust.
This report discussed the business structure of Woolworths Limited which is a public
company. The firm has to comply with the legal system in Australia along with the provisions
of Corporations Act 2001. There are different advantages of a corporate structure such as a
separate legal entity, limited liability, favourable taxation laws, listing of shares, hierarchy
structure and others. Along with merits, there are different limitations of a company structure
as well such as complex legal structure, many legal requirements, difficulty in management,
directors can be held liable, and others. Further, advantages and disadvantages of other legal
structures were compared with the structure of a company. Owners should carefully select the
business structure by analysing its advantages and disadvantages to ensure that they comply
with its legal requirements effectively.

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References
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right-business-structure
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