Setting up a partnership in Australia

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Running head: ASSESSMENT 2
ASSESSMENT 2: SCRIPT
Name of the Student
Name of the University
Author Note

1ASSESSMENT 2
Setting up a Partnership
For setting up a partnership in Australia, the partners need to apply for an Australian
Business Number (ABN) and then registering it with the Director of the Consumer Affairs
Victoria (CAV)1. Registration is mandatory for limited partnership ventures, while it is not
for the general partnerships. Similarly, a written agreement is essentially recommended,
however it is not compulsory; oral agreement is equally enforceable in case of legal disputes
between partners2. The partnership firm would require a Tax File Number (TFN) for filing its
tax returns before the ATO, even though it is not a taxable entity. In case of a turnover of
$75,000 or above, the firm would be required to file for file Good and Services Tax (GST)
mandatorily3. The following steps are to be followed for setting up the partnership business as
discussed under sections 54-58 of the Partnership Act 1958 (Vic):
 Determining the number of partners of the firm. Segregate and mention the limited
and unlimited partners in case of limited partnership ventures4.
 A consensus between the partners is essential in terms of the nature of their business,
the roles, powers and liability that each partner shall bear, contribution of each partner
and their share of profits and losses accordingly, dispute resolution methods,
procedure of dissolution of the firm.
 Drafting a Partnership Agreement by incorporating the aspects agreed by the partners
in terms of the operation and management of the firm, mentioned above.
 Deciding a name for the business by avoiding the already trademarked names, and
eventually registering it at the trademark office.
1 "Partnership", Business.Vic.Gov.Au (Webpage, 2020) <https://www.business.vic.gov.au/setting-up-a-
business/business-structure/partnership>.
2 "Types Of Limited Partnership", Consumer.Vic.Gov.Au (Webpage, 2020)
<https://www.consumer.vic.gov.au/licensing-and-registration/limited-partnerships/what-is-a-limited-
partnership>.
3 "Partnership", Business.Vic.Gov.Au (Webpage, 2020) <https://www.business.vic.gov.au/setting-up-a-
business/business-structure/partnership>.
4 Ibid.

2ASSESSMENT 2
 Registering the business with the Consumer Affairs Victoria (CAV)
 Applying for necessary licenses and registration certificates.
 Finding the most relevant and appropriate Insurance for the business5.
Written Agreements Recommended
In terms of general partnership structure, written agreements are not extremely vital,
however, it is always recommended for avoiding disputes related to disagreement between
the partners in terms of the nature and operational details of the firm. In case of limited
liability partnerships, written agreements are extremely essential as this form of partnership
may see disputes, not only regarding the general disagreement between the partners, but most
importantly disputes arise in terms of liability bearing by the partner who had agreed to bear
unlimited liability initially. Among others, the partnership agreement shall mainly include:
 Shares of profit and loss
 Assets of the business and its division
 Dispute resolution
 Dissolution of partnership
Profit Sharing
Even though equal profit sharing is the key to a dispute-free and healthy partnership;
however, it is hardly possible when the initial contribution or investment of the partners are
not equal. For example: if partner A has contributed $10,000 and B has invested $20,000,
then B deserves to collect more profit than A. If the turnover is $60,000 then B should draw
$40,000 and A should get the rest. Therefore, it is highly recommended that the partners
should opt for a written agreement where the profit-sharing proportion shall be mentioned
clearly in order to avoid future disputes regarding the shares of revenue.
5 "Partnership", Business.Vic.Gov.Au (Webpage, 2020) <https://www.business.vic.gov.au/setting-up-a-
business/business-structure/partnership>.

3ASSESSMENT 2
Dissolution of Partnership
There are different reasons for which the partnership could be dissolved as per section
36-39 of the Partnership Act 1958 (Vic). Such as6:
 The set term of the partnership as held under the Partnership Agreement has come to
an end;
 One or more partners have expressly informed to exit the business;
 One or more partners have ceased to hold legality to continue as partners;
 A partner has become bankrupt;
 One of the partners dies;
 The entire business becomes insolvent or bankrupt;
 The court orders to dissolve the partnership.
When the partnership is dissolved, the partners are required to carry out the following steps7:
 Setting an official date to close all business operations and transaction, which helps
the partners to carry out the closing procedures smoothly.
 Taking care of the employees’ final settlements like accrued leave payments,
outstanding wages or other allowances,
 Notifying the suppliers and customers about the closing along with making the
outstanding payments,
 Ending the lease agreement, in case the business had a lease,
 Selling off the assets of the business and clearing the outstanding bills and debts.
Assets may include outstanding stocks, equipment and machinery, furniture, business
vehicle, property and premise, intellectual properties, et cetera.
6 "Dissolve Your Business Partnerships | Business.Gov.Au", Business.Gov.Au (Webpage, 2020)
<https://www.business.gov.au/Change-and-growth/Restructuring/Dissolve-your-business-partnerships>
7 "How To Close Your Business | Business.Gov.Au", Business.Gov.Au (Webpage, 2020)
<https://www.business.gov.au/Closing/Selling-or-closing-your-business/How-to-close-your-business>.

4ASSESSMENT 2
 Settling the taxes and other legal responsibilities
 Keeping the business records, like financial records, employee records, supplier and
customer records intact for at least 5 years.
Asset Distribution in the absence of an Agreement
The assets of the partnership are owned by the partners and not by the business, in the
proportion agreed by them in the Partnership Agreement. Therefore, a clear distribution is
necessary after the business is dissolved. Section 48(b) of the Partnership Act 1958 (Vic)
states the rule for distributing the assets, prioritising the following serial:
 First, paying off the debts due with the outside creditors;
 Second, paying the partners their contributions other than capital;
 Third, paying the partners their share of capital investment;
 Lastly, the residue shall be divided among the partners as per the agreed profit
distribution proportion8.
8 Partnership Act 1958 (Vic), s 48(b).

5ASSESSMENT 2
BIBLIOGRAPHY
Legislation
Partnership Act 1958 (Vic)
Official Websites
"Dissolve Your Business Partnerships | Business.Gov.Au", Business.Gov.Au (Webpage,
2020) <https://www.business.gov.au/Change-and-growth/Restructuring/Dissolve-your-
business-partnerships>
"How To Close Your Business | Business.Gov.Au", Business.Gov.Au (Webpage, 2020)
<https://www.business.gov.au/Closing/Selling-or-closing-your-business/How-to-close-your-
business>
"Partnership", Business.Vic.Gov.Au (Webpage, 2020)
<https://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership>
"Types Of Limited Partnership", Consumer.Vic.Gov.Au (Webpage, 2020)
<https://www.consumer.vic.gov.au/licensing-and-registration/limited-partnerships/what-is-a-
limited-partnership>