Legal Advice on Partnership, Trust and Company Business Structures

The article provides legal advice on the characteristics, advantages and disadvantages of partnership, trust and company business structures. It discusses the rights, duties and liabilities of partners, trustees and companies. The article suggests that Emma and Oliver should choose a business structure that suits their needs and preferences. Contact Beanstalk consultancy firm for more information.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
Name of the University
Author Note

1CORPORATE LAW
To: Emma and Oliver
From: Beanstalk consultancy firm
Subject: Legal advice regarding partnership
Issue 1
The particular issue which the given memo is concerned with the characteristics and the
nature of partnership. In addition to this, the advantages as well as disadvantages of the
partnership along with the given trust and company as available to Emma and Oliver also needs
to be discussed.
Rule
Partnership
The partnership can be described as a business form which involves two parties who form
a relationship to carry a single business together. The partnership comprises of two types, the
general partnership and the limited partnership.
The Nature and characteristics of partnership
It needs to be understood by the different individuals that partnership is a simple form of
a business which is not quite expensive as well to be set up. The only condition is that the
involvement of minimum two individuals is required to form a partnership, whereas the
maximum number of partners as involved can be around 100. It is usually believed that the
different partners in a business have a liability which is unlimited in nature and not only do they
have to be individually obliged towards the partnership but they are also required to be obliged
collectively1. In a partnership, the different partners usually agree share the profits of the
business as well as the losses which have been incurred in the due course of the business.
However, in a partnership the liability of the partners is unlimited and they need to adhere
by the debts as well as the obligation of the business. These losses are shared by the different
partners in an agreed ratio equation. In addition to this, each partner of the business can be stated
to be a principal as well as an agent and they are bound to act in accordance with each other as
well as with the firm. The relationships between the different partners may be based on a
contractual relation which may be written or applied. The end of a partnership would take place
in case of the death of a partner, the bankruptcy of one or either partners and the insanity. It is
crucial to be registered for the GST if the annual turnover of the business is above $75000 but
cannot be considered to be mandatory to register the firm.
1 Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal environment.
Cengage Learning, 2018.

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Advantages of a partnership business
The main advantages of a partnership business can be stated to be the fact that it is easy
to establish a firm in partnership and even easier to change the structure of the firm or add
partners as and when it is possible to do so. In addition to this, it can also considered to be easy
for a partnership to borrow the capital and invest accordingly as it helps in increasing the base of
the business. Very often the well performing employees can be made to be the partners of the
firm and thereby by forming a partnership it can also be ensured that a business is kept private.
Moreover, the profits can be split easily in case of a partnership based on the individual
contribution as made by the different partners at large.
Disadvantages of a partnership business
The primary disadvantage of a partner`s liability is that the debt cab be taken to be
unlimited in nature. This means that when the partners are unable to pay the particular debt, their
personal properties might be impacted. In addition to this, as the partners share a joint liability
the debt of the other partners also have to be paid by the former. Additionally, in case the
structure of a partnership is required to be changed, it becomes considerably important to divide
the firm`s assets accordingly or add which is a troublesome issue.
Trust
The trust can be described as an obligation on a particular person to hold a particular
asset for the benefit off the other party. In this respect, it can be mentioned that the person who
holds the asset or the property for the wholesome benefit of the other individual. In this case, the
person who holds the property is known as a trustee and the other one for whom the property is
being held is known as the beneficiary2. A trustee can be stated to be an employee who holds an
adequate share in the business and ensures that the income derived from the particular business
can be given to the beneficiary as per the deed of the trust. In addition to this, trust usually exists
when certain families are required to run the particular business.
Nature and characteristics of a Trust
The primary nature of a trust is that it can be considered to be quite expensive to run a
trust. In addition to this, the formal trust deed is the agreement which gives an idea about the
operations of a trust. Moreover, it is crucial for the trustee to take administrative tasks easily and
be legally responsible for the different operations of the trust at large.
Advantages of a Trust
The primary advantages of a trust are that in case of a corporate trust, the liability can be
considered to be quite limited in nature and the maintenance of privacy is comparatively easy in
a trust. In addition to this, the trust deed can be considered to be a crucial document and the
2 Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal environment.
Cengage Learning, 2018.

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distribution of the income benefits and other are quite different as per the trust deed. The income
which is earned through the trust can be understood to be taxed as the general income of the
individual.
Disadvantages of the Trust
The main disadvantages of a trust can be stated to be the fact that it is quite complex in
nature and can be considered to be quite time consuming. In addition to this, it can also be
mentioned that the establishment of a trust can be quite complex and the maintenance aspect can
also be difficult. Additionally, the different trusts often face large scale complexities with respect
to the borrowing as the nature of the loans are quite complex. Moreover, the trust deed which is
formed often limits the power of the trustees.
Company
The definition of a company can be stated to be a business structure type which possesses
a legal entity which is quite separate which can be considered to be very different from a
partnership. Australia has two types of companies which are the public companies who can offer
the shares of the company to the public and the proprietary limited companies who are unable to
raise money for themselves. The Corporations Act 2001 governs the operations of the different
types of company in Australia.
Nature and characteristics
According to Mann and Roberts (2015), the company possesses a separate entity and has
a limited liability. The business structure of a company can be considered to be quite complex in
nature and comprises of higher set up costs to even set up the firm and to run the firm. The
turnover which the company earns belongs to the company and is not distributed amongst the
different members or the todirectors. It is important for the company to register itself with the
Australian Securities and Investments Commission (ASIC)3. The company is governed by The
Corporations Act 2001. Like other forms of business, it is important that a company needs to be
registered for the GST in case the annual turnover as earned by the company is above $75000.
Advantages of a company
The different advantages of the shareholders are that the company is quite limited in
nature and in order to sell the shares, they are easily transferred. The shareholders of the
company are held by the company and any company as registered under the Australian act, can
carry out its business in any regions of the country. It is allowed to expand its human resource
and capital and the company is liable to pay its own tax.
3 Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal environment.
Cengage Learning, 2018.

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Disadvantages
The primary disadvantage to maintain and establish a company is that there exists large
number of complexities in case the company needs to be winded up. Moreover, the financial
matters of the company is usually public hence, this leads to a lack of privacy for the firm. In
addition to this, the reporting system which needs to be followed by the firm can be stated to be
quite complex in nature. Moreover, the different directors are generally held liable in order to
pay the debts of the firm. Additionally, the profits of the firm can be taken to be taxable in
nature.
Application to the case
The given case is largely related to the case of Oliver and Emma. Hence, if Emma and
Oliver adopt the partnership form of the business then in this case, they would be collectively
liable for one another`s action. In this case, there exists a joint liability. Moreover, if they make a
choice of the trust type of a business then, one would be required to be a trustee and the other
would become a beneficiary. Hence, in this case, the trustee would have been required to share
the profits of the business to the particular beneficiary which would not be considered to be a
suitable case for the business set up. In addition to this, in the case of Oliver and Emma, Oliver
would be investing financially whereas Emma has simply planned to invest her time into the
case. As there exists equal contribution of the parties, a trust business cannot be considered to be
good. Additionally, a company structure would be good for the firm at large which would then
imply that the partners would have a limited liability. However, as Oliver has had, around six
years of imprisonment for the funds misappropriation, it may have a poor impact on the
credibility of Emma as well who will then have a hefty personal debt4. Hence, in case the
business fails to perform well, then the entire business would be a burden and these owners
would be liable personally. Hence, the characteristics, advantages as well as the disadvantages of
a partnership, company and a trust is considered to be quite essential in order to choose the right
business structure for Emma and Oliver.
Conclusion
Hence, having described the nature as well as the characteristics, advantages as well as he
disadvantages of a partnership, company and a trust, the different options available to Oliver and
Emma were discussed at large.
4 DeMott, Deborah A. "Relationships of Trust and Confidence in the Workplace." (2014) Cornell L. Rev.100: 1255

5CORPORATE LAW
To: Emma and Oliver
From: The Beanstalk business consultancy firm
Subject: Legal advice in regard to the rights, duties and liabilities of the partners
Issue 2
The second issue relates to the determination of the duties, the rights as well as the
liabilities which are generally associated with the different partnerships, trusts and the
companies, the choice of which is available to Emma and Oliver.
Rule
Partnership
In the given section, the rights, duties and the liabilities of a partnership form of a
business have been discussed.
Rights
The different partners possess the right to participate and conduct the different business
cases. Moreover, they also possess a right to take the decision for the business and have an
access to the books of accounts of the firm. Moreover, they are also given the authority to enjoy
the profits of the business in a ratio as greed during the partnership agreement or as per their
capital contribution. In addition to this, the partner can be stated to have the right of
indemnifying the different expenses that are undertaken by them in the normal course of
business. The partnership property can also be used by him in the normal course of the
business5. Moreover, in case there is an emergency, the partner possesses the right to bear the
decision making decisions alone. Moreover, in case the partner has some actions which are
incorrect or so before the partnership, he cannot be held liable for it. It is up to the partner to
decide upon the time when he needs to retire. Lastly, in case a partner decides to leave the
business, he does possess the right to re-invest his money in similar avenues.
Duties and Liabilities of a Partner
It needs to be noted that the partners in a partnership possess unlimited liability and that
not only are they required to be collectively liable for a business but they are also individually
liable for a business at large6. As the principle of a joint liability is stated, it mentions that a
partner is liable for any act or omission which has taken place from the side of the other partner
also. In addition to this, the partner would be liable in case there is a debt taken by another
5 Partnership (2018) Business.vic.gov.au <http://www.business.vic.gov.au/setting-up-a-business/business-
structure/partnership>
6 Trust (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-types/Business-
structures/Trust>

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partner. The personal assets of the different partners are also under considerable risk if the firm is
unable to pay its debts7. Moreover, it is the duty of a partner to have a separate Tax File Number
as well as an Australian Business Number for the purposes of the business. Additionally, the
partners are liable to pay the personal income tax as well because the partnership on the whole is
not needed to pay an income tax. In addition to this, the partners are also required to look after
their own superannuation fund as they are not the employees of the partnership firm.
Trust
The rights, duties and liabilities of a business in case of a trust has been given as follows:
Rights of Trustee
The trustee in a business possess the right to get a reimbursement for all the costs as well
as the expenses which he will be making for the trust property as well as for the beneficiary. In
this aspect, the beneficiary will be required to fully reimburse the trustee8. Moreover, it is the
right of a trustee to seek the assistance of a legal adviser and address the court in case of any
dispute which takes place in the business at large. There exists a breach of trust agreement
which can be accessed but the trustee at large9. In addition to this, the trustee has the right to
claim a compensation for the losses which might have incurred in case there has been a breach of
trust which results from the end of a beneficiary10.
Rights of Beneficiary
The beneficiary pf the business possess its own set of rights to receive constant updates
and a considerable share of income from the property which has been given for the trust
business. In addition to this, the beneficiary should be given a detailed report of expenditure,
distribution of finances and other related information as required11. Moreover, the beneficiary has
a right to take the trustee to the court in case of any breach.
7 DeMott, Deborah A. "Relationships of Trust and Confidence in the Workplace." (2014) Cornell L. Rev.100: 1255
8 Haldane, Andrew. "Who owns a company?." (In Speech, University of Edinburgh Corporate Finance Conference,
May 22nd. 2015)
9 Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson Education, 2014.
10 Company (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-types/
Business-structures/Company>
11 Dowling, Robyn, and Jennifer Kent. "Practice and public–private partnerships in sustainable transport
governance: The case of car sharing in Sydney, Australia." Transport Policy 40 (2015): 58-64.

7CORPORATE LAW
Duties and Liabilities of the trustee
It is the duty of a trustee not to mix his personal property of the business with any related
asset of the trust. In addition to this, he must ensure that a separate account is created which
provides the investment details of the firm and he must see to it that the property of the trust is
not used for the personal benefits of the trustee at large12. It is the duty of the trustee to deal with
all the beneficiaries in the same manner and see to it that the property of the trust is invested in
the right manner and note details like the tax return receipts, expenditure reports and other
related documents.
Duties and Liabilities of the beneficiary
The primary duty and liability of the beneficiary is that he is required to undertake an
understanding of the property and carryout his duties as per the deed instruction. Moreover, he
has the liability to check the actions of the trustee regularly and ensure that the trustee is put
under a limitation in case he is not able to perform his duties well13. Moreover, it is crucial that
the trust has the basic knowledge of the working and related operations of a trust. Additionally,
the beneficiary needs to possess a knowledge of how the trust function administers.
Company
The following rights and duties are present for the shareholders and directors of a
company:
The rights of the shareholders and the directors
The shareholder is required to attend the meetings of a company and receive an annual
report in lieu of the same. In addition to this, the shareholder is bound to receive the dividends
regularly. Moreover, they are also required to inspect onto the books of the company which may
assist them in understanding the performance of the firm. Moreover, the shareholder has the right
to charge against the company14. The directors in a company have the right to enforce the
statutory laws as well as the provisions of the firm so that the regular business can be carried out
easily. Moreover, the director also has a right to give an input about the general decision of the
board. Lastly, he should be paid a considerable remuneration as agreed and be allowed to hold
his position unless he is willing to retire on his own15.
12 Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and cases in the legal
environment. Wolters Kluwer Law & Business, 2015.
13 Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. "Commercial applications of company law." (2013)
14 DeMott, Deborah A. "Relationships of Trust and Confidence in the Workplace." (2014) Cornell L. Rev.100: 1255
15 Dowling, Robyn, and Jennifer Kent. "Practice and public–private partnerships in sustainable transport
governance: The case of car sharing in Sydney, Australia." Transport Policy 40 (2015): 58-64.

8CORPORATE LAW
Duties and Liabilities of shareholders and directors
As a director is directly involved in the personal activities of the business, the director is
personally liable for the losses as well as the debts of the company. Moreover, it is the obligation
of a director to continue working even after the company has discontinued being involved in a
trade or even after the company has been deregistered at large. However, in case of the
shareholders, this is not the case and they are required to be paid. In addition to this, the different
members who are the directors of the firm need to have the obligation as well as the liability to
ensure success within certain circumstances at large16. Very often the director is considered to be
personally liable for the different debts in case a solvency takes place and the company gains a
loss due to the breach of duties. In case any illegal duty has taken place, the director must take
considerable actions.
Application
In the case of Emma and Oliver, if they are bound to choose a partnership business then it
needs to be noted that they will be held responsible for each other’s activities and in case a trust
is chosen, then the roles interchange and one becomes dependent on the other. However, this
should not be the case and as the partners will have an equal contribution in the business they
should be able to share the profits adequately17. As stated earlier while Emma will invest her
time, Oliver will invest the finance which does not make them suitable for the trust. It can be
thus stated that only the company structure will be suitable for the company will be the company
structure but it should have a condition of limited liability. Hence, deciding upon the rights,
liabilities and other duties of the business can be considered to be essential with respect to the
firm`s operations18.
Conclusion
Hence, the given section discussed the rights, duties and the liabilities which are
associated with the partnerships, trusts as well as the companies which are available to Emma
and Oliver.
16 Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson Education, 2014.
17 Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and cases in the legal
environment. Wolters Kluwer Law & Business, 2015.
18 Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. "Commercial applications of company law." (2013)

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To: Emma and Oliver
From: The Beanstalk business consultancy firm
Subject: Legal advice in regard to the best structure for Emma and Oliver.
Issue 3
The given issue is to recommend with adequate reasons, the best business structure which
can be adopted by Emma and Oliver.
Rule
From the analysis, it can be witnessed that a trust generally places an obligation on an
individual to hold the specific property for the benefit of the other party. In this manner, the
trustee would be running the business and the beneficiary would witness the fruits of the
business. This form of a business is generally considered to be a better form of a business for
those parties where a trust is required to be shared within a family. In another way, a company is
a typical business form as present in Australia and either the company can take the form of a
public company or take the form of a proprietary limited company19. A company has a formal
planning and means serious concern. In addition to this, the Corporations Act of 2001, largely
governs both the companies at large. Moreover, a trust company acts as a trustee for the
beneficiaries and in a scenario where there are no family members present, this business does not
function well20.
Application
In the given case, it can be understood that Emma and Oliver need to form a proprietary
firm which needs to have the characteristics of a private company and based on this it would be
able to gain the disadvantages of a private company. With respect to this, it would be required to
follow the Corporations act. The directors as well as the shareholders as involved in the
particular set up would be required to have the same rights as well as the duties as possible.
Moreover, in their absence, Oliver and Emma can engage in assigning a trustee to look after their
operations on their behalf21. The best business stricture for the given case should be the
formation of a company where Emma needs to be appointed as a Director and Oliver can be
made a passive investor. In the case of Oliver, the elderly mother and the disabled child can be
the beneficiary of the trust company and for Emma `s son can be made the beneficiary. In this
way, they would largely benefit from the operations of the firm.
19 Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson Education, 2014.
20 Dowling, Robyn, and Jennifer Kent. "Practice and public–private partnerships in sustainable transport
governance: The case of car sharing in Sydney, Australia." Transport Policy 40 (2015): 58-64.
21 Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and cases in the legal
environment. Wolters Kluwer Law & Business, 2015.

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Conclusion
Hence, in order to present a summary of the analysis, it can be understood that the best
stricture for Oliver and Emma will be that of a company where Oliver can be the investor and
Emma will be the Director. It is also recommended that the company is set up in the form of a
trust whereby the dependent family members of Oliver and Emma would be able to enjoy the
benefits of the firm in the form of my beneficiaries.

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References and Bibliography
Article/Book/Journal
Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal
environment. Cengage Learning, 2018.
Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson
Education, 2014.
Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and
cases in the legal environment. Wolters Kluwer Law & Business, 2015.
DeMott, Deborah A. "Relationships of Trust and Confidence in the Workplace." (2014) Cornell
L. Rev.100: 1255
Dowling, Robyn, and Jennifer Kent. "Practice and public–private partnerships in sustainable
transport governance: The case of car sharing in Sydney, Australia." Transport Policy 40 (2015):
58-64.
Haldane, Andrew. "Who owns a company?." (In Speech, University of Edinburgh Corporate
Finance Conference, May 22nd. 2015)
Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. "Commercial applications of
company law." (2013)
Iyer, Easwar. "Theory of alliances: partnership and partner characteristics." (2013) In Nonprofit
and Business Sector Collaboration, pp. 48-64. Routledge
Mann, Richard A., and Barry S. Roberts. Business law and the regulation of business. Nelson
Education, 2015.
Pozen, Robert C., et al. "trusts&trustees." Trusts & Trustees18.3 (2012).
Wilkins, Thomas S. "From strategic partnership to strategic alliance? Australia-Japan security
ties and the Asia-Pacific." asia policy 20 (2015): 81-112.
Legislation
Corporations Act 2001
Websites
Company (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-
and-types/Business-structures/Company>
Directors' Liabilities When Things Go Wrong | ASIC - Australian Securities And Investments
Commission (2018) Asic.gov.au https://asic.gov.au/for-business/your-business/tools-and-
resources-for-business-names-and-companies/asic-guide-for-small-business-directors/directors-
liabilities-when-things-go-wrong/

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Partnership (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-
structures-and-types/Business-structures/Partnership>
Partnership (2018) Business.vic.gov.au
<http://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership>
Trust (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-
types/Business-structures/Trust>
Trust | Small Business (2018) Smallbusiness.wa.gov.au
<https://www.smallbusiness.wa.gov.au/business-advice/business-structure/trust>\