Comparative Analysis of Business Structures: Warwick and Sunny

This report analyzes various business structures applicable in Australia, focusing on the scenarios of Warwick and Sunny who intend to establish a college. The report examines the advantages and disadvantages of different business structures, including sole trader, partnership, and company structures. It emphasizes that the sole trader structure is unsuitable due to the founders' personal liability. The partnership structure is also not the best choice due to the potential for shared liability among partners. The report concludes that a proprietary company limited by shares is the most suitable option for Warwick and Sunny. This structure provides the benefit of limited liability, where the directors are not personally liable for the company's actions, making it the least risky option for their business venture. The analysis is supported by references to relevant literature.

Running head: BUSINESS AND LEGAL ENVIRONMENT
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BUSINESS AND LEGAL ENVIRONMENT
NAME OF THE STUDENT:
Name of the university:
Author’s note:

1BUSINESS AND LEGAL ENVIRONMENT
Issues
The issues involved in the given scenario what type of business will be best for Warwick
and Sunny and which business will be least risky for them.
Rules
There are three types of business structure in the territory of Australia, Such as, firstly,
sole trader business structure, secondly; company, thirdly; partnership (Cavusgil et al., 2014).
The sole trader business structure means an individual will be legally responsible for every
aspect of his business, which has included the losses and debts. The owner of the business will
be liable in his day to day business conduct.
The company business structure is one separate type of business, where the company
holds a separate legal entity like an individual (Tennent, 2014). This business structure in totally
separate kind of business than a partnership or sole traders. There are two types of companies,
such as public companies and proprietary companies. The proprietary company can be divided
into two categories, such as limited by shares and limited by guarantees.
The partnership business structure is one type of business where two or more individuals
have distributed their income as well as losses among themselves. There are three types of
partnership businesses such as the general partnership, limited partnership, and incorporated
limited partnership.

2BUSINESS AND LEGAL ENVIRONMENT
Application
Applying the Australian government’s business structure in the given scenario, the sole
trader business can not apply here. The leading cause of the non-application of the sole trader
business that an individual mainly occupies this business. There is a sole proprietorship in this
type of business and the person will be personally liable for his business conduct. In the given
scenario, two friends want to set up a college and they also wish to the least risky business.
Therefore, the sole trader business will be unsafe for them because owners will be liable for their
business conduct.
Applying the partnership business structure in Australia, the partners of that type of
business will be liable for the business conduct of their partnership firm. Usually, in the
partnership firm, the profits or losses of the business have affected the partners personally. In the
general partnership business, the partners are equally liable for the conduct of business. In the
given scenario, as they want a least risky business; therefore, the partnership business structure
will not be applicable for them.
Applying the company business structure in this given scenario, it can be stated that the
company structure limited by share will be more preferable to them. If they make a company,
then it should be a proprietary company as in a public company, at least three directors are
needed to form it. However, in the given scenario, there are only two persons who are eligible for
constructing a proprietary company. They can build a proprietary company limited by shares for
the least risk business. The proprietary company, which is limited by shares, is not so risky in its
business com=nduct. The directors are not personally liable for the conduct of that company.

3BUSINESS AND LEGAL ENVIRONMENT
Conclusion
Therefore, it can be concluded that a proprietary company, which is limited by shares, will be
more appropriate for them as it is least risky in the business.

4BUSINESS AND LEGAL ENVIRONMENT
References
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.
(2014). International business. Pearson Australia.
Tennent, K. (2014). Management and the Free-Standing Company: The New Zealand and
Australia Land Company c. 1866–1900. The Journal of Imperial and Commonwealth
History, 41(1), 81-97.