Corporations And Business Structure Report

Running head: CORPORATIONS AND BUSINESS STRUCTURE
CORPORATIONS AND BUSINESS STRUCTURE
Name of Student
Name of University

CORPORATIONS AND BUSINESS STRUCTURE1
Author Note

CORPORATIONS AND BUSINESS STRUCTURE2
Introduction
The report discusses the business structures of company and partnership with relation to the
liabilities and the fiduciary duties that are found in both the structures. Company business
structure can be defined as a legal entity separate from its owners, carrying on industrial or
commercial enterprise, whereas partnership business is started by two or more people who have
the common goal of earning profit and for sharing the responsibility and ownership of the
business management. The current report is seen to be divided into three parts. The first part
describes the liabilities of both the business structures are discussed. The second part describes
the fiduciary duties present in both the business structures. In the third past a case has been
illustrated for advising the client for the director’s duties in a company.
Part A
The term ‘liability’ can be described under the business law as the debts and obligations
of a business that are financial in nature and arises in the course of the business operations. The
liabilities of both the business structures towards the third parties have been discussed as
following:
Company

CORPORATIONS AND BUSINESS STRUCTURE3
In the Corporations Act, section 91 a company is defined as formed and registered under
this act. Unlike the business structures of partnership and sole-trading a company has a legal
entity that is separate from the owners. A company can be seen as having the similar rights as a
normal individual. The directors of a company do not have any personal liabilities on the behalf
of the company as the company has a legal entity separate from its owners, directors or
shareholders. The company, nonetheless, can be seen to be holding any director responsible for
any act or omission thereafter that would be seen as prejudicial to the company’s interest and
violates the duties discharged by a director in a joint and collective way. The fiduciary duties of
a director can be seen as mentioned in the sections 180-183 Corporations Act2.
A director’s duties are typically be acting in such a way that is beneficial for the
company. The director has the liability for acting in the collective interest of all the members
present. However, a director requires for considering the other interests as well under certain
situations. As per the Australian Securities and Investment Commission (ASIC)3 a director would
be seen as liable for the breach of any obligation even when the company has long been ceased
in existence. According to section 588G4 it has been stated that the directors could be seen as
responsible for any debts that had been incurred by company under some particular
circumstances if the company can be seen as unable for paying off the debts. The duty of a
director under this section’s provision is seen as to be preventing the company from conducting
insolvent trading if the directors can prove that they have reasons for believing that the company
either has already been insolvent or can be suspected to be insolvent in the future. ‘Lifting the
Veil’ are the situations where the shareholders could be held responsible towards the debts that
1 Corporations Act 2001, s.9
2 Ibid, s.180-183
3 Australian Securities and Investment Commission
4 Corporations Act 2001, s.588G