The primary disadvantage of this business structure

LAW205
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Contents
Overview.................................................................................................................... 1
Partnership..................................................................................................................... 1
Company structure........................................................................................................... 3
Additional details............................................................................................................. 6
Reporting requirements..................................................................................................... 6
Bibliography.................................................................................................................. 8
Legislation.................................................................................................................. 8
Books/Journals............................................................................................................. 8
Other Resources........................................................................................................... 8

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Overview
A business can be set up under a variety of business structures based on the nature and size of the
business as well as the requirements of the business owners. In the given situation, the client
wants to set up a property management business with the name Bill’s property management
service. At the initial level, he seems to have a three-business structure namely sole trader,
partnership firm, and corporation. Nevertheless, the client wants other people to join the business
later and therefore he cannot adopt the sole trader structure as under this structure only one
person has all the control on the business matters. Now the advice is to be given on partnership
and company structure considering the specific concern raised by the client.
Partnership
Firstly, to discuss partnership structure this is to state that under this scenario person join hands
to do business together and divide profit and loss among them. Any person can join the business
with the approval of present partners and the business does not have a separate identity than the
partners of the business. Since the partners are joint owners of the business of the firm hence the
business cannot be set up with the individual name in general. Further, if the client wants to
register the business with a specific business name the same would require to register the same
with ASIC. The important thing to mention here is that if the client would get its business
register on an individual's name, later on, he would not be able to add any partner without
transferring the business name to the new entity. Partnership firm structure has many advantages
as well as disadvantages that also reflect its features. These are mentioned as below:-

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Advantages:-
 It is an easy and inexpensive structure to set whereby the owner gets their business name
registered with ASIC. Further, state partnership laws regulate the working and
compliance of partnership firms.
 A business remains easy to operate under this structure, as the same has to fulfill very
minimum reporting requirements1.
 The structure of business liberal and new people can join the business without being
involved in strict procedures.
 Another advantage of this structure is that a business can get the benefit of a range of
skills that each partner brings with him/her.
 Partners do not have to pay double taxes. The profits of the firm are divide among
partners and then after partners have to pay income tax on their income that they receive
a share of profits.
 Capital can be arranged easily by introducing a new partner to the business.
 Similar to the formation closure of the business is also easy under this structure.
Disadvantages
 The primary disadvantage of this business structure is the unlimited liability of partners2.
It means in case of failure to pay business debts out of business funds, the personal estate
of partners can be used for such payments.
1 distinctbusinesssolutions.com.au, Pros and Cons of Different Business Structures in Australia (distinct business
solution) (http://www.distinctbusinesssolutions.com.au/business-plan/pros-cons-different-business-structures-
australia/>.
2 Kym Anderson, Australia's Economy in Its International Context: Volume 1: 1904-1954 (University of Adelaide
Press, 2009)