Corporations Law

Running head: Corporations Law 1
Corporations Law
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Running head: Corporations Law 2
Corporations Law
Question 1
Introduction
Michael is the owner of a restaurant which is located in the busy Church Street in the
precinct of Parramatta. The restaurant is very famous. Michael recently bought another
restaurant within Blacktown. He has run the business as a sole trader for 30 years.
The business is thriving. Adam and John, Michael’s two sons recently joined him in
the business after they completed their degree in Bachelor of Business. They would like to
expand the business as they have seen new opportunities that may do well in the new
markets. They wish for the family business to be flexible for expansion and for the easy
raising of the required capital. They are also aware of the tax benefits that come with the
operation of a business which has a company structure instead of a partnership or a sole
trader.
Michael’s sons persuade him to heed to the advice of changing the family business to
a company which would be run by the family. However, the naming of the future company
introduces some contention as Michael prefers to retain the current name while his two sons
prefer to call the company “Sicilian Treats”. Michael does not favour the idea of
incorporation as he thinks that such a business structure is unsuitable for a small business
such as his. He is not cognisant of the effect or advantages of having a business structure of a
company. He also has fears of the disadvantages that may come with the change and of his
sons’ attempt to push him away from the business. He wants to ensure his retention of the
ownership and control of the business.
Steps for Incorporation

Running head: Corporations Law 3
In order for Michael and his two sons to change the business from a sole trade to a
company, they would have to do the following: create a bank account that is separate and
solely meant for the business; create for the company a new Tax File Number (ITAA 1997);
choose a name for the company and ensure that there is no any other business with the same
name. They will also have to use a name ending such as ‘Pty Ltd’ after the chosen name. If
Michael and his family decide not to have a company name, then they may use their
Australian Company Number as the company name (Australian Government).
They may also apply for an Australian Business Number as this would provide more
legitimacy on documents on invoices that may be sent to suppliers or customers. This enables
them to have a quick search of the company by the use of the ABN.
Another step would be to create the business Constitution or reliance on the
replaceable rules as per the Corporations Act (2001). The making of the Constitution would
involve its drafting before the company is registered and obtaining of written consent from all
the members. The Constitution is also drafted so that it comes into force following the
registration of the company. The company will then pass a special resolution through the
Constitution (William 2016).
Benefits of Incorporation
Changing the business from a sole trade to a company has its advantages which
include; limiting the personal liability of a business man (Copuroglu 2017). As a sole trader,
Michael is directly liable to the risks and operations of the business. However, if they change
into a company, this liability would be limited as the company is a separate entity from the
owners.