Business Structures for a Fashion Business

Running Head: BUSINESS LAW
Business Law
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Answer 1
To
Mr John Smith
Re: Advice on the business structures which can be used by you for your fashion business
Respected Mr John
We have come to known about your business requirements. Let me brief it for you in
order to avoid any misunderstandings. You want to establish a small business in the fashion
industry and specifically you want to enter into the Men’s Clothing segment. You want to know
which would be the most appropriate business structures for your venture. Our advice to you will
incorporate information relating to all forms of business structures present legally so that you
have a clear understanding about which structure would best suit your business.
Out of the various business structures available we are informing you about a few specific
structures as they may be relate to your business idea
 Sole Proprietorship
 Partnership
 Joint Venture
 Company

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As the name suggests a sole proprietorship is carried out by a single person. You also want
to carry out you business also thus this may be a suitable business structure for you. If you
choose this business structure you would be provided with total control over the way in which
you want your business to function. When you select this business structure to carry out you
business you would also have an advantage of low cost. This is because forming a sole trading
business is one of the cheapest alternatives to any other form of businesses. You would not
require any cost of registration with respect to either the business or the business name. The
business can run smoothly with the use of your personal name itself. The legal regulations which
would be imposed on you if you opt to choose this business structure will also be very less as
compared to other business structures. However there are a few things which may be of concern
to you if you opt to select sole trading as a business structure. Firstly there is no difference
between you and your business. Your personal identity and the identity of the business is the
same. Subsequently there is no provisions form a limited liability. This means that business
liability and your personal liability same. All losses which is faced by the business are your
personal losses. Secondly as the income of the business and your personal income is same you
may fall within the upper tier of taxation which is 47% and will have to pay more tax. Thirdly,
your personal assets will also be at risk in case of loss if you select this business structure. Thus
in the light of the features of sole trading we would not advice you of choosing this business
structure as it may be too risk in terms of your personal liability.
We would now have a look at another business structure which is known as a “partnership”.
As suggested by the name this business is carried out by two or more people together who are
known as the partners. The business may or may not be registered and its presence is identified
by applying the rules of common law or the Partnership Act 1963(Cth). To make it simple, you

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will deem to carry out a partnership form of business if you jointly conduct its operation with
another person(s) with the view of making profit on an ongoing basis. The cost of forming the
business may also be low because it may or may not be registered and the registration and
formation process is also simple. It may however require you to have a partnership deed based in
which the rights and duties of the people involved are identified. If you choose to select
partnership as your business structure you will be having additional resources in terms of capital
and skill which the other partner will bring into the business. However there are certain
significant cons of selecting partnership as a business structure because of which we are not
advising you to select it for your business. In the same way as the above structure of a sole
trading, partnership also lack provides related to limited liability. Thus here also you can be
liable personally forms the business debt. In addition the feature of “jointly and severally liable”
in a partnership makes a partner liable to all actions of other partners in the course of business.
The partner is the agent and the principal of this business. This means that any action committed
by your partner will have the potential to bind you and your personal assets to its liabilities. As
this is your own business idea having a partner may cause unnecessary interventions in the
business management and decision making as they will be jointly involved in making the
business decisions in the capacity as partners of the business (Cohen, 2017).
A company is a most common form of business structures is used in Australia and any other
country to carry out a business. This structure has certain distinct features which no other
business structure has. These are separate legal entity, perpetual existence, limited liability and
transfer of ownership.
The features of separate legal entity suggest that the identity of the owner and the identity of
the business are different. When a company is formed it becomes a separate legal entity at law