Business Law: Suitability of Business Structures for Retail Business

This essay discusses the suitability of different business structures, such as partnerships, trusts, and companies, for a retail business. It highlights the characteristics of each structure, including liability, governance, and registration requirements under Australian law. The essay recommends a proprietary company limited by shares as the most suitable structure for a small retail business with $4 million startup capital, in accordance with the Corporations Act 2001 (Cth). It also addresses the roles and responsibilities of shareholders and directors within this structure, considering the age and legal capacity of potential stakeholders. Desklib provides access to similar solved assignments and study resources for students.

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Business Law
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The suitability of different business structure for retail business
A retail business can be conducted by way of different business structure, all of which
has different approaches to the business. A partnership firm would take a different route to
conduct the retail business in comparison to a trust and as well as a company.
A Partnership business requires at least two person to start the firm, which involves
the partners to have an unlimited liability. The partners are the principal as well as the agent
of the firm, who are held liable, individually as well as jointly, for the firm’s liabilities and
obligations and similarly they are to share the profit of the firm as per their individual
contribution to the firm (Wood, 2002). A partnership business is dissolved when the partners
dies or becomes mentally incapable to perform their duties as partners. A partnership firm
may or may not be registered, as it is not mandatory in Australia, except when its annual
turnover is more than $75000.
A Trust is an expensive business set up where a trustee is appointed to take care of
the trust property for benefit of the beneficiaries. A trustee is the one to be held responsible
for the governance of the trust; however, he cannot use the trust property or any income
incurred out of it for his personal use. It bears a limited liability which it easier to maintain
the organizational privacy and the beneficiaries get their shares as directed by the trust deed.
However, the trust deed may impose various restrictions over the trustee regarding his
authority over the trust.
While, a company is a separate legal entity that has its own identity like a person. A
company can be private as well as public. A private company is known as ‘propriety limited’
as it is refrained to raise fund and capital from the public by issuance of shares, while a public
company can do so. In both cases, the shareholders are not made responsible for paying the
debt of the company, unlike the other form of business structure. In Australia, the
Corporations Act 2001 (Cth) govern the matters related to company. A company whose

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turnover is over $75000 requires registration under the Australian Securities and Investments
Commission (ASIC).
Best type of business structure to run a retail business
As per Part 1.5 of the Corporations Act 2001 (Cth), a small business should be
registered as a proprietary company limited by shares where it must have at least 1
shareholder and 1 or more directors. Therefore, for the given scenario, a proprietary
company limited by shares would be suggested to be the best business structure to run a
retail business with $4 million startup capital. Here, the four children could be the
shareholders of the company; the 21 and 19 year old one can also hold a post of a director,
while the minors can be shareholders only till the time the attain the age of maturity.

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References
Corporations Act 2001 (Cth)
Wood, G. (2002). A partnership model of corporate ethics. Journal of Business ethics, 40(1),
61-73.