Commercial Law: Business Structure, Formalities, Bell Gorge, Gisela, Expansion Plan, Incorporation

This document discusses various aspects of commercial law including business structure, formalities for establishing a partnership, liability in Bell Gorge case, responsibility for injuries, advantages and disadvantages of partnership and company structure, and steps for incorporation.

Running head: COMMERCIAL LAW
COMMERCIAL LAW
Name of Student
Name of University
Author Note

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Business Structure
Under section 1 of the Partnership Act1 partnership has been defined as the legal relation
between two people who had been carrying on a business with a common view to be earning
profit. The partners in a partnership business are seen as having a legal relationship with a
common intention of sharing profits and liabilities of the business together. In a partnership the
partners are seen as to be jointly and severally liable for the debts of the business. In this current
scenario it can be seen that the business operated by Judy and Matt follows the business structure
of partnership, they are seen as using the vehicles that are operated by the business and are
further seen as sharing the profits and losses equally.
Formalities for establishing Partnership
The formalities that Judy and Matt need to comply with for establishing partnership business
structure has been mentioned under the provisions of section 52 of the Partnership Act2.
Following the subsection 1 of the section an application for the registration of a limited
partnership or incorporated limited partnership should be made to the Commission in a way that
has been approved by the Commission; be signed by either each of the partners in the partnership
or any other person who has been given authority by the partners to sign on behalf the partners if
the application has been made by the partners, and in any other case be signed by each of the
proposed partners; registering the proposed firm name as business name under the Business
Names Registration Act3, and lodging the same two months before the proposed date of the
1 Patnership Act 1891, s.1
2 Ibid, s.53
3Business Names Registration At 2011

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commencement of the business. The application should further be containing the particulars in
relation to the full names of each of the partners or the proposed partners and partnership;
particulars in relation to the full address of each of the partners or the proposed partners and
partnerships; statement confirming whether each of the partners would be a general partner or a
limited partner and a statement regarding the details of each of the limited partner and the extent
of the liabilities of the partners if the application is made for limited partnership. For the
registration of a partnership business the partners need to comply with the following steps-
determining the number of both general and limited partners; agreeing on the key issues such as
limits of the liabilities proportionately to the investment of the capitals, and the authority level of
each of the partners in binding agreements on behalf of the partnership business; drawing up of
Partnership Agreement which would be highlighting the key aspects, like the roles, authorities
and liabilities of each of the partners and the distributions of the profits and assets; making sure
that the business name that had been proposed is not infringing on any trademark that is existing;
registering the business name; making applications for the licenses and registrations.
Bell Gorge
In the current scenario it was seen that Judy and Matt have been on land based tourism
business in Derby, Western Australia operating in the Kimberley region of Australia. They are
seen as taking people on the pastoral lease-lands and the land in the King Leopold Ranges
Conservation Park, a state land in the King Leopold Ranges Conservation Park. Judy and Matt
had taken all types of licenses for the operations of a tourism business as well as the insurance
for public liability. Currently Judy and Matt have to pay camping fees, entry fees and access fees
and incidental costs for getting access toward the properties where they have to be taking their

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customers. At, Bell Gorge, one of the particular locations, they are seen to be having an informal
agreement with the leaseholder of the land for the payments of the fees. They had been camping
at that particular location 12 times in the peak period without paying any kind of fees. The
leaseholders of Bell Gorge had claimed as to be owing $7,200 from Judy and Matt. Under
section 9 of the Partnership Act4 all the partners in a partnership business are seen as to be
jointly and severally liable with the other partners in the business for all the obligations and the
debts that had been incurred by the course of the business. Applying this provision it can be held
that Bell Gorge leaseholders would be suing Judy and Matt jointly and severally if they cannot
recover their $7,200 admission fees from the business.
Gisela
It is seen in the current scenario that on a recent trip to the King Leopold Ranges
Conversation Park, Gisela, one of the customers of Judy and Matt, slipped from a wooden
stairway and got injured at the time of viewing aboriginal rock art paintings. The State
Government had declared that they would not be taking any responsibilities for any injury in the
conservation parks. In furtherance it can be seen that Judy and Matt had been in a contract with
the State government where it had been stated that all responsibilities of all the customers of
Judy and Matt are to be taken by Judy and Matt when they visit the conservation parks. Section
10 of the Partnership Act5 provides that for any act or omission of any partner in a partnership
business, who has been acting in the ordinary course of business of the partnership, any loss or
injury occurs to any third party the business would be jointly and severally liable. In the current
scenario for the injury of Gisela Judy and Matt would be held responsible in a joint and several
4 Partnership Act 1891, s.9
5 Ibid, s.10

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way. Further the State Government had declared that they would not be taking any
responsibilities for any injury in the conservation parks and Judy and Matt has signed a contract
which mentions that they would be held liable for the injuries happening in the conservative
parks to their customers. Hence Gisela would be suing Judy and Matt.
Expansion Plan
It is seen that in the given scenario that Judy and Matt are presently operating under
partnership business structure. There are various advantages and disadvantages of partnership
business structure. In the partnership business structure the advantages are seen as- the business
structure is very simple OK, it is really cheap to setup, if the business is trading in under another
name must be registered as a business name, there is no chance of public disclosure of the
financial information, there is a sharing of profit and losses between the partners in equal
amount. However there are certain disadvantages of the partnership business structure. This
disadvantages are- partnership has unlimited liability; the partners are liable for the debts and
obligations of all other partners, provided that the partners have to be acting within the scope of
the partnership business; there are no maximum number of members selected; there is no
perpetual succession without the prior agreement of the partners; there are no general managers
in partnership business often times; sharing profit and losses can also be seen as one of the
disadvantages of the partnership firms as the partner should be equally liable for the losses
incurred by the business as they would be profitable in equal way when there is a profit.
The business structure that could be advised to Judy and Matt is a company for their tourism
business that they have been running for last 20 years. As it is seen that Judy and Matt has
substantial property Holdings they can go under an arrangement where after transferring the

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partnership firm into company business structure the company could be acquiring their
substantial non cash asset and they would be considered as the directors of the company. A
company can be seen as a business structure which is seen to be having a separate legal entity
unlike partnership for sole trading businesses. A company like any other natural person can be
seen as incurring debt, getting sued and suing. In a company structure the owner of the
shareholders as seen to be able to be limiting their personal liabilities and would not be held
responsible for the debts of the company. To be registering a company with the Australian
Securities and Investments Commission the directors and officers of the company are required to
be complying with legal observations that has been mentioned under the Corporations Act 2001.
The benefits of a company structure business are- reliability for the shareholders are seen as
Limited, it is easy to be transferring the ownership of the shares by selling them to another party,
the shareholders can be employed by the company itself, company has the capacity to sue and be
sued, the shareholders and directors can have access to wider capital and skill basis the taxation
rate should be more favourable and the company can be trading anywhere in Australia. However
there are certain disadvantages of the company structure as well. These are- establishing,
maintaining and winding up of a company can be seen as very expensive, the reporting
requirements for a company are very complex and hard for normal person to be understanding,
the financial affairs of the company are seen as public, for failing to meet the legal obligations
the directors can be held personally liable for the debts of the company and the prophets that are
distributed to the shareholders are always taxable. Weighing the advantages and disadvantages of
the company and partnership business structure It is seen that Judy and Matt good be profitable if
they change your business structure to the company business structure.

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Incorporation of Company
There are certain steps that a business needs to take for incorporating the business as a company.
the company business structure is seen as one of the most popular business structures in the
whole of Australia as the company is seen as a separate legal entity and had limited liability for
the directors and the shareholders. Steps for incorporation of the company under the provisions
of the Corporations Act 20016 are- determining what type of company the business is trying to
be incorporated into deciding on an appropriate structure for the internal Governance of the
company, opening the consent from each of the proposed directors and the secretary, reserving
and selecting a new name for the company, locating and address for the registered office of the
company, locating the main headquarter of the business, setting on structure of the shares and
members, filing an application to the Australian Securities and Investment Commission and
paying a registration fee and finally receiving the certificate of the registration.
Incorporation of Partnership
an incorporated limited partnership under the section 51 of the Partnership Act 18917 is
described as a body corporate with the legal personality that is separate from all of the partners in
the business with perpetual succession. Under section 51 of the Partnership Act 18918 an
incorporated limited partnership can be seen as having the legal capacity and power of any
individual person and it also has the powers that a body corporate has which includes the power
to be carrying on a business of ownership entering into contracts for acquiring rights or
liabilities, creating conferring wearing on cancelling interest in the partnership firm acquiring
6 Corporation Act 2001
7 Partnership Act 1891, s.51
8 Ibid

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holding in disposing of the personal or real properties appointing attorneys and agents and in
furtherance acting as agent for any other person, forming and participating in the formation of
companies or other incorporated limited partnership, participating in partnerships trust joint
ventures or any other associations and arrangements for profit sharing and finally doing other
things as it can be authorized to be doing under the provisions of the Partnership Act 1891.
Applying these two provisions it can be seen that even if Judy and Matt do not expand their
business on incorporate they would be still better position in a legal way if they were
incorporated.

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Reference
Australian Securities and Investment Commission
Business Names Registration Act 2011
Corporation Act 2001
Patnership Act 1891