Company Law: Business Structures, Liability, and Consumer Law

Running Head: COMPANY LAW
COMPANY LAW
Name of the Student:
Name of the University:
Author Note

1COMPANY LAW
Answer One:
The key business structures that exist in Australia are:
 Sole trader
 Company
 Partnership
 Trust
However the relevant business structures that are applicable in the given scenario are Company
and Partnership.
In case of a company the members are the owners of the company and the directors are the ones
who run the company. Companies can be both public and proprietary companies.
In case of a company, if the directors of a company fulfill their obligations as imposed on them
by the Corporations Act 2001, the directors will not be held personally liable for the liabilities
incurred by the company. This means that the debts and liabilities of the company must be paid
by the company. However in case of breach of duties of directors as provided in sections 180-
184 of the Corporations Act 2001 (Cth) .
The advantages of a company are:
 Limited Liability of the shareholders of the company
 Transfer of ownership of a company is easy. Such transfer can be made possible by
selling shares
 The company can trade everywhere in Australia
 The taxation Rates are favorable

2COMPANY LAW
The disadvantages are:
 Expensive to establish and set up
 The requirements of reporting to the ASIC is more complicated for companies
 The financial affairs of the company are avail to the public
 Profits are distributed among al the shareholders
Partnership is a business structure in which a number of people are involved who carry on the
business structure together. A partnership is similar to a sole trader business structure however as
opposed to a sole trade, the business is run jointly by 2 or more people. The maximum number of
members is fixed at 20. The Partnership Act 1963 governs the actions of partners in a
partnership.
The advantages of Partnership are:
 Easy and inexpensive to establish as the start up costs are less
 More capital is available for business compared to a sole trader
 There is more opportunity to split the incomes and therefore is important for tax savings
 Partnerships are subjected to limited external regulation
 It is also easy to change the business structure
The disadvantages of Partnerships include:
 Liability of the partners for paying the debts incurred by the company
 Every partner jointly as well as severally liable to pay the debts of the company
 Disagreements about taking decisions among partners in partnerships are common
 Every partner is liable for the actions of the other partners in the partnership

3COMPANY LAW
Key points in relation to financial contribution and distribution in written partnerships
The important points that can be included in partnership agreements are:
Decision Making- A partnership agreement must contain the clause about how decision are to be
taken in case of conflicts of interest of the partners.
Capital Contribution- A partnership agreement must contain how the capital is to be contributed
by the members.
Salaries and Distributions- Every partnership agreement must contain the provisions regarding
how the profits and the salaries are to be distributed among the partners.
Answer Two:
Issue
The first issue that has been identified in the given scenario is whether Peter has the authority to
order the T shirts without the permission of the other partners. The Second issue that has been
identified is whether I am liable for the act of Peter
Rule
The operations of partnerships in Australia are governed by the Partnership Act 1963.
It has been provided in section 9(1) of the Partnership Act, that a partner except in case of a
limited partnership is to be treated as the agent of the partnership firm and therefore is entitled to
act on behalf of the other partners for the purpose of carrying on the business of the partnership
firm.