Legal Advice on Partnership, Trust and Company Business Structures

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.

2CORPORATE LAW
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.

3CORPORATE LAW
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.