Advantages of Incorporating a Corporation for Michael and his Sons

This article discusses the advantages of incorporating a corporation for Michael and his sons in their family business expansion. It highlights benefits such as limited liability, tax advantages, and separate legal identity.

In the present question the issue arises if any advantage will be available to Michael and his sons
if they decide to incorporate a corporation. In the present case, Michaels's sons want to join his
business instead and they also want to expand their family business. However in order to expand
the business, they want to know which business sector will be most suitable and what advantages
will be available if they incorporate a company to manage their business.
In this case, it can be stated that if Michael and his sons John and Adam decided to incorporate a
company, there are certain benefits that are associated with the business structure of a
corporation. It needs to be loaded in this context that these benefits will not be available if
Michael and his sons decide to run their family business as a sole trader or as a partnership.
Therefore even if the costs that has to be in there for registering the company is hired as against
the situation where the parties have adopted the business structure of a sole trader or partnership,
but it needs to be noted that in view of the advantages associated with it, the higher cost of
registering the company can be considered to be the part of expenditures that is related with the
management of the business (Busch, 2009). Another issue that has to be decided in this question
is related with the registration of business name. It is cheaper to register business name, as
against the registration of a corporation. However, it is worth mentioning in this regard that after
the parties have registered a corporation, they are not required to separate the registered the name
as its business name. The reason behind this position is that the corporations’ law provides that
the full name of the corporation is going to end with "Pty Ltd" and it has to be used for the
business (Lipton, 2007).
Regarding the ongoing cost of managing the business, there is a need for registering the business
name that needs to be renewed regularly. The government charges a fee for the purpose of

renewing their business name. As compared to the situation, when a corporation has been
registered, it has to pay an annual review fee to the ASIC. However, a major advantage that is
associated with the business structure of a corporation is present in the form of the limited
liability of its members. In this context, the law provides that the members of the company are
not personally liable for its debt. Therefore, their liability is confined to the shares that are owned
by them. However, the advantage of limited tablet is not available to sole traders and partners. In
the same way, however, this advantage is not available to the parties when they are running a
business as a sole trader or partnership. Similarly, among other benefits of the business structure
of a corporation, a major advantage is associated with the rate of tax that is applicable to the
corporations. While the companies in Australia have to pay flat rate of tax, but the individuals
who are running their business after registering the business name are required to pay tax at
marginal rate. The rate that is charged from the corporations is less as compared to the rate that is
applicable in case of individuals. It also needs to be mentioned in this context that in the eyes of
law, a company enjoys a separate personality. Therefore the identity of the company is distinct
from its owners and directors. In view of this legal fiction, the company can own property in its
own name, and similarly it can also enter contracts. Legal proceedings can be initiated by the
company are against the company in its own name.
Hence, before dealing with the steps that have to be taken for registering the company, it needs
to be decided if the business structure of a corporation will be most suitable for Michael and his
sons. However, on account of the benefits associated with the business center of a corporation, it
can be said that the incorporation of the company will be most suitable option for them. This
advice is particularly appropriate when Michael and his sons are considering expanding their
family business. The family business of Michael is flourishing and his sons, John and Adam are

also willing to join the business. Hence they are looking to expand their family business. For this
purpose, the incorporation of a company will be the most suitable option for them. Apart from
the benefits mentioned above, it also needs to be noted that it is easy for a company to raise
funds that will be required for expanding the business.
Another issue that has been discussing this question is that Michael wants to continue to do
business under its present name. However, his sons want that the name "Sicilian Treats" should
be used for business. As mentioned above, the situation is different in case of registration of
business name as compared to the registration of a company. There are certain issues that have to
be considered by selecting the name for the company. The law provides that the name of the
company should not be similar to the name of any other company. Therefore a name that is
identical with any other company or business should not be selected. In this regard, a search
should be made for seeking the availability of the name. When the name desired by the parties is
available, they can register it as the name of the company (Wymeersch, 2001).
Another requirement that is present in this context is that the name of the company should be
able to reveal the status of the company and the liability of its members. Therefore, when the
liability of the members is restricted to the value of the shares owned by then, the corporation's
name has to end with the words "Pty Ltd". Hence, in this case also, it is possible for Michael to
continue with the present name of the business and at the same time, they can register the name
"Sicilian Treats" as its business name.
Therefore in the end, it can be stated that the above-mentioned benefits will be available to
Michael and his sons. In case they decide to incorporate the company for running their family
business.

Question 2
After going through the facts of this case, the issue rises if George hasn't already required for
creating a binding contract for Golden Gate Technologies Ltd. (GGT). In this case, GGT has
entered into a contract with George, appointing him as the salesman of the company. The
company is involved in this of software development that can be used for making the workload
efficient. It has been provided in the contract that was concluded between GGT and George that
he will have the authority of offering a discount of 10%. Therefore, if God wants to offer a
discount of more than 10%, he will require the approval of the manager of the company. Under
the circumstances, George meets Brendon, who is the CIO of Poolworths Ltd.. Brandon is
looking for software for his company that can make the workload more efficient. For this
purpose, Brendon is ready to purchase software worth $2 million. At the same time, George was
having low sales in these months. Therefore he needs an offer to Brendon, according to which he
was ready to give a discount of 15%. Brendon agrees, but when he visits the office of GGT, the
manager of the company refuses to sign the contract with Poolworth. The manager of GGT
explains to Brendon that. George did not have the authority of giving a huge discount of 15%.
For the purpose of dealing with this issue, it has to be considered if apparent authority is present
on part of George for acting as an agent of GGT. According to the law, in case of agency
relationship, it is considered that the actions of the agent that take place while dealing with a
third party are going to have an effect on the legal rights of the principal.. Therefore, in the style
of cases it is not relevant if the other party is aware of the agreement that has been made between
the principal and the agent regarding the authority of the agent (DeMott, 2018). The reason is
that such cases the authority runs from principal to the agent. Hence if the agent has express or

implied authority, the principle is going to be bound by actions of its agents. In this regard, an
example can be given of the situation where the seller of a particular property is not aware of the
identity of the purchasor. The person who is considered as a prospect the buyer may turn out to
be an agent who is working for undisclosed principal. However, in such cases, the ignorance on
part of the seller is not the ground on which the seller can avoid the transaction (Sealy, 1991).
In this situation, there can be certain cases where the individual does not have the authority for
acting as an agent or if authority has not been given to such person to act in that way. In such
cases, the issue arises if the principal is going to be free from the actions of such a person.
Therefore in such a case it has to be seen if the agent has the apparent authority to act for the
principal. For dealing with this question, it needs to be considered if it was reasonable for third
parties to believe, in view of the words of the principal, either in writing or spoken or giving in to
the conduct of the principal that the agent has the authority to act for the principal (Oliver and
Schoff, 2017). The apparent authority of the agent reveals itself in the words that are
communicated to the third-party. Due to this reason, in such cases the authority flows towards
the third-party and not towards the agent.
At the same time, there can be certain cases where the apparent authority of the agent is based on
the principle of estoppel. In this context, it is mentioned by the doctrine of estoppel that a person
cannot deny any promise made earlier if the other party had relied on it and suffered a detriment.
Therefore, the doctrine of promissory estoppel has been introduced with a view to avoid
injustice. Estoppel can also act as a substitute for the need under the contract law that every
promise should be supported by consideration. The apparent authority of the agent can also arise
due to the prior business transactions that have taken place between the parties (Watts, 2002).

Certain protection has also been provided by the corporations’ law. For this purpose, the
common law rule of indoor management has been incorporated in the Corporations Act, 2001. It
has been provided by the law that when an outsider has formed a contract with any person who is
supposed to be acting on behalf of the corporation, but does not have the necessary authority,
while in the past, the company can avoid such contracts, but in view of the decision given in
Royal British Bank v Turquand (1856), it was stated that when an outsider has entered into a
convention where the company in good faith and without any notice or reasonable grounds for
suspecting any irregularity, such transaction will not be affected by such irregularities related
with the internal management of the company.
In view of the circumstances, in the present is also it can be stated that John had offered a
discount of 15% to Brendon. However, Brandon did not know that it has been mentioned in the
contract computed between GGT and George that he can only offer a discount of up to 10%.
Therefore, if George was going to offer a discount of more than 10%, he will need the approval
of the manager of the company. However in the present case, the manager's approval was not
taken and George straightaway offered the discount of 15%
Therefore in view of the apparent authority of George and also the statutory assumptions that can
be made under section 129, Corporations Act, it can be concluded that Poolworths can enforce a
contract against GGT.

References
Busch, D. (2009). Unauthorised Agency in the Principles of European Contract Law. SSRN
Electronic Journal.
DeMott, D. (2018). Fiduciary Principles in Agency Law. SSRN Electronic Journal.
Lipton, P. (2007). A History of Company Law in Colonial Australia: Legal Evolution and
Economic Development. SSRN Electronic Journal.
Oliver, J. and Schoff, P. (2017). Agency and Competition Law in Australia Following ACCC v
Flight Centre Travel Group. Journal of European Competition Law & Practice, 8(5), pp.321-
328.
Sealy, L. (1991). Agency Principles and the Rule in Turquand&s Case. The Cambridge Law
Journal, 50(1), pp.47-49.
Watts, P. (2002). Deeds and the Principles of Authority in Agency Law. Oxford University
Commonwealth Law Journal, 2(1), pp.93-123.
Wymeersch, E. (2001). Company Law in Europe and European Company Law. SSRN Electronic
Journal.
Case Law
Royal British Bank v Turquand (1856) 6 E&B 327