BUSINESS LAW. Business Law Name of the Student Name of

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

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BUSINESS LAW
Letter of Advice
To: John Smith
From: Accountant
Date: 27 May 2019
Subject: letter of advice for formation of the most appropriate business structure
A small business can be operated as per several business structure, each one of which
has a different aspect and approach. Business structure like partnership form of business, trust
business, sole proprietorship and company are available to a businessman who can get his
small business registered under these business structures.
A partnership form of business structure asks for at least 2 partners to begin. A
partnership firm vests unlimited liability on the partners of the firm which makes them jointly
as well as severally liable to share the debts, liability as well as the profit of the firm as
partners. The partners act as the principal as well as the agent of the partnership firm who
stand liable for all the dealings and transaction of the firm (Lewis 2013). The profit and loss
is mainly shared as per the contribution of each partner towards the business. A partnership
business unlike any other business structure, gets dissolved when one out of the two partners
dies or fails to carry out his duties and responsibilities as a partner. The Australian law does
not ask a partnership business to be mandatorily registered, unless its annual turnover exceeds
$75000 (Lewis 2013). As a partnership business is easy to establish, it is easier to change its
structure as well. It is easier to borrow in a partnership business. It is easier to keep internal
dealings private for the transactions are only known to the partners and therefore, it is easier
to secure information and maintain privacy. A partnership form of business involves less
external control as it is not bound by the decision of any authority or auditors, for
partnerships do their own audit. However, it is a drawback that the personal property of the

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BUSINESS LAW
partners are affected in case the firm incurs a debt and fails to pay back to the creditors
(Lewis 2013). One partner shall be held liable for the liability of another; all the partners shall
be marked liable to sustain the loss of the entire firm and the loss shall be shared as per their
contribution, just like profit-sharing. In spite the several advantages of a partnership form of
business, it is true that it becomes complicated and costly to divide the asset of the
partnership firm in case a partner leaves the set up (Lewis 2013).
A trust, on the other hand, is an expensive business structure which requires a trustee
to take the responsibility of the trust property for the benefit of the member of the trust or the
beneficiaries. The trustee is only responsible for taking care of the trust property or business,
however he is not supposed to derive any benefit out of such business. A trustee is only liable
to draw remuneration from the trust business (DeMott 2014). It is however not a legal entity
like a company, yet it is easier to raise capital for the trust business, having a lesser amount of
liability, compared to other form of business set up. It is expensive to set up and difficult to
divide in case member wants its share. A formal trust deed is required in a trust business to
outline the operation of the trust business and decide the share of the beneficiaries. A trust
business requires the trustee to undertake yearly administrative task. A trustee is to be held
legally responsible for the operations of the business, where a trustee of a trust can even be a
company who liability would be to protect the asset of the trust business. A trust business is
liable to pay tax on its general income as a business. Amidst several advantages, there are
several issues that trust might face, like higher expenses, difficulty in borrowing,
complexities in incurring loans, restricted power of trustees, et cetera, which can be hindrance
on its growth and development (DeMott 2014).
A sole trader business structure involves a single person trading as a sole trader
thereby becoming responsible for all the aspects and transaction of the business, including the
debts and losses which are bore by the sole trader alone as there is no one else to share the