Analysis of Business Structures: Partnership and Company

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

1BUSINESS LAW
Section A
This part of the assignment carries out an analysis about the two types of business
structures, through which business can be carried out in Australia. These are the business
structures of company and partnership. Both form of business structures are dealt with by
separate areas of law. The partnership structure is taken care of by the Partnership Act 1963
(Cth) and the corporations are taken care of by the Corporation Act 2001 (Cth).
Partnership
The members who conduct a partnership business are termed as partners. There has to be
two or more partners who carry out the partnership business. However there may be a limit on
the maximum number of partners in a business. Generally only 20 people can at a maximum
carry out this form of business1. The business does not require a formal registration under law.
Its existence can be identified by s6 of the PA 19632 and provisions of the common law. In
general the courts will deem a business as partnership where there are elements of the business
being carried out in common and for a profit making purpose by two or more person. The phrase
“in common” means that the business is carried out ad owned together by the partners. There
must be continuity in the business or else it may be considered as a joint venture3. There are
various distinct features of partnerships. Firstly a partnership is not a “separate legal entity” this
signifies to the court that the business identity and partner’s identity are totally different. The
assets which are owned by the partnership business are considered to be the assets of the
partners4. The tax which is to be imposed on the business profits is the same as the tax which is
1 Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson Education, 2014.
2 Partnership Act 1963 (Cth) s 6
3 Bulchandani, K. R. BUSINESS LAW FOR MANAGEMENT. Himalaya Publishing House, 2017.
4 Glover, W., and D. Doss. "Business law for people in business." Austin, TX: Sentia Publishing (2017).

2BUSINESS LAW
imposed individually on the partners. The next feature is of joint and several liability. This
signifies that partners may be liable if the other partners have committed a wrongful act and their
liability can be unlimited. The protection of limited labiality not being present allows the
creditors of business to make a direct claim on the personal assets of the partners. Thus in the
present situation it is to be clarified that it is a risky form of business. In addition to these
features duties are imposed on partners with respect to each other as well as in relation to the
business. They are not allowed to carry out a business which has the capacity of competing with
the business which is carried out by the partnership. They will also not be allowed to make any
form of secret profit from the business and if they have made such profit without the consent of
the partners the proceeds would be held by them legally at a constructive trust for the partnership
business.5
Company
Company form of business is subjected to the governance by the Corporation Act 2001
(Cth). The people who manage the business are known as directors and those who own the
business are called shareholders. This makes it clear that there is a distinction between the
owners and the managers of a company. The directors and officers are provided the power to
manage the affairs of the business by s 198A and they have also been imposed with a lot of
responsibilities and duties such as those provided under s180-191 of the CA6. The company can
execute a contract in its own name with or without the use of a common seal as given in s 127.
This means that a direct claim can be brought against the company in case of a default. In the
same way there is a corporate veil present between the managers and the identity of the
5 Roach, Lee. Card and James' Business Law. Oxford University Press, 2016.
6 Corporation Act 2001 (Cth) s 180-191

3BUSINESS LAW
company7. The identity of the company is deemed to be separate at law according to the
principles of the Salomon v A Salomon and Co Ltd8 case. The ownership of the company is
divided into shares. This means a person holding the shares will be a part owner of the company.
These shares can be transferred easily subjected to restrictions imposed by the constitution of the
company. It is important to note that a company has been provided with protection under the
rules of limited liability. The personal assets of the managers and owners in case of default will
not be available to be claimed by the creditors. The creditors can only claim the amount which is
owned by the company9. Thus only the share investment may be at stake in case something goes
wrong.
Section B
In this part of the assignment, the Pros and Cons of both partnership and Company had
been discussed to provide an appropriate advice to Sam, Stan, Fran and Fergie about the most
appropriate business structure for their business activity.
The Advantages of a Corporation (Proprietary)10
Separate Legal Personality
The identity of the company is deemed to be separate at law according to the principles of
the Salomon v A Salomon and Co Ltd case. There is a corporate veil present between the
managers and the identity of the company. It can own property by itself.
Perpetual existence
7 Cheeseman, H., 2016. Business Law . Boston, Massachusetts: Pearson Education.
8 [1897] AC 22
9 Stoica, Fl C., and Ch Ene. "Business Law Business Organisations." (2016).
10 Allen, William T., Reinier Kraakman, and Guhan Subramanian. Commentaries and Cases on the Law of Business
Organizations: 2016-2017 Statutory Supplement. Wolters Kluwer Law & Business, 2016.