Advantages and Disadvantages of Partnership, Company, and Family Trust Structures

Case law

TABLE OF CONTENTS
Section C....................................................................................................................................3
(a) Partnership........................................................................................................................3
(b) Company...........................................................................................................................4
(c) Family Trust......................................................................................................................4
REFERENCES...........................................................................................................................6

Section C
(a) Partnership
The partnership can be between husband and wife as per TR 94/8. In case Betty
switches from sole trader to partnership entities then there are certain advantages and
disadvantages she is having to face which are stated below (Grob, 2017).
Advantages:
 Entering into partnership is very cheap and requires less paper work and few start up
cost in respect to the general partnership as compared to other forms of business
organizations.
 Opportunity for getting wide range of skill sets which is one of the advantages of it as
each partner will bring in different skill sets in the business which will enhance the
opportunity to create more capital and resources.
 Partnership firm is simpler to operate as compared to sole trader structure, is there is
no reporting obligation as the work is carried out is completely up to partners
themselves.
 No tax on the personal income of partners.
Disadvantages:
 Under general partnership, each partner will be having a unlimited liability which
means that in case of any problem, the personal belongings of the partners can be
accessed.
 The profits of the partnership are distributed among the partners as the agreement,
which means that the no one partner will receive full amount (I. R. Commrs v.
Williamson (1928) 14 T.C. 335).
 In case, any of the partner fails to pay his or her share, then it is the obligation of
other partners to jointly make the payment.
 Under partnership, the business may not be able to take the benefit of government
grants and other tax concessions such as early stage investor concessions.
Tax requirements
Betty would be required to file for partnership tax return which would be declared as
the income earned by the partnership firm and it also provides distribution of income among
partners. Tax rate under it is:
Taxable income Tax on this income
0 – $18,200 Nil