Business Law Assignment: Retail Business Structure Recommendation

This business law report examines the suitability of various business structures—specifically partnerships, trusts, and companies—for a retail business with four members, two adults and two minors. The report explores the characteristics, advantages, and disadvantages of each structure, considering factors such as liability, profit sharing, and legal requirements. It analyzes the implications of the Corporations Act 2001 (Cth) and recommends a proprietary company limited by shares as the most appropriate structure, allowing the parents to include their children as shareholders while the adults serve as directors. The report emphasizes the benefits of limited liability for the minors and the overall structure's suitability for family-owned retail ventures.

Running head: BUSINESS LAW
Business Law
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There are different business structures that help up different forms of business in
different ways, each one emphasizing on a certain part of the business. However, all of these
have the common aim to make profit. Like a partnership form of a business have a common
goal to make profit along with all its partners as per their contribution to the form, while a
trust looks forward to protect a property or a business for the benefit of the beneficiary for
whom the trust is formed. In this paper we discuss about the suitability of different business
structures for a retail business that includes four members, two of whom are adults and two
are minors.
Partnership
Partnership involves at least two people who create a partnership form in order to
carry out a business with the goal of making profit. A partnership can be general as well as
limited. It is a simple and cheap business setup involving two persons at least with unlimited
liability for the members (Iyer, 2013). The partners shall be individually as well as
collectively liable for the obligation of the form and the debt incurred by the firm while it is
in operation. The partners of the firm have the liability to share the profit and loss of the
business in accordance to their personal contribution made to create the firm. In a partnership
form of business the partners are the principal as well as the agent of the firm, and the
partners are all bound with each other as long as they are a part of such firm. Partnership is a
contractual relation between the partners, made orally or in writing; implied partnership
business is not uncommon as well (Iyer, 2013). Registration of a partnership firm is not
mandatory in Australia; however, a firm having a turnover above $75,000 needs to be
registered for filing GST.
It is easy to form a partnership firm and therefore, even easier to change its structure
and give it a different form of business if necessary. It involves least external regulation. It

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has certain disadvantages like the unlimited liability that the partners have pertaining to the
share of profit and loss of the firm. In case a partner fails to make the payment for the
outstanding, his personal property gets affected. While, joint liability of the partners makes
them liable for each other’s wrongful act or omission. It is a tedious as well as costly
procedure to divide the asset of the individual partners when the firm is dissolved.
Trust
A trust property is created by the Owner of the trust and it is vested upon a person call
the trustee for the benefit of the beneficiary to enjoy the trust property after attaining or
fulfilling certain criteria. Acrostic holds the trust business and surrenders th1e income
incurred from such business to the beneficiary as per the instruction of the trust deed. A
trustee bears the official responsibility of the operation that is conducted in the trust property.
In case of a corporate trustee, he has a limited liability towards the trust (DeMott, 2014).
It needs to be noted that a trust is a complicated business structure that is time
consuming as well as expensive in comparison to the partnership form of business
Company
A company is a separate legal entity that has unlimited liability in most cases. In
Australia company can be proprietary limited as well as a public company, the first being
barred from raising money from the public by issuing stocks and shares while the second one
has the liberty to issue shares to the general public for raising capital and fund for the growth
and development of the company (Haldane, 2015). Corporations Act 2001 (Cth) governs the
different forms of company in Australia and also list down the necessary provisions that helps
to resolve disputes relating to company. The liabilities of the shareholders of a company are
limited which means the shareholders are not personally liable to meet the debts of the

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company from their personal account. It is easier to change the ownership of the company by
way of selling out personal shares to another. Payment of taxes is hassle-free in case of
company as the company shall be liable to pay its own tax and it does not involve the
prophets incurred by the shareholders. A company is open too much wider investments as
well as capital gains along with greater number of human resource acquisition (Haldane,
2015).
However, a company is a complex business structure which is quite expensive to run
and difficult to maintain privacy due to breach of confidentiality by the shareholders, which
is the common phenomena. The entire corporate veil saves the shareholders and the directors
from being held personally liable for the debt of the company; however, at certain
circumstances the corporate veil is lifted.
The best business structure for a retail business
The Corporations Act 2001 (Cth) in its Part 1.5 clearly mentioned that a small
business must be registered under the small proprietary company limited by shares, bound by
at least one shareholder and one director. Therefore in this case a proprietary company
limited by shares would be apt for the family in which the parents wish to make their four
children, 2 adults and 2 minors the shareholders. Here, the two adults can take the post of
director while the minor to can as shareholders as of now, till they become capable of
carrying out the duties of a director by attaining the age of maturity. By setting up a company
the parents shall make the four children the shareholders either having equal shares or
different in number, which would decide their liability towards the company along with their
share of profit from the company . The minors would act as shareholders of the company and
would be liable to obtain the profit only and not the loss, till they become an adult. The
minors would not be held responsible for the debt of the company as well as the wrongful act
or omission of the directors who are in charge of the governance of the company.

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References
Corporations Act 2001 (Cth)
DeMott, D. A. (2014). Relationships of Trust and Confidence in the Workplace. Cornell L.
Rev., 100, 1255.
Haldane, A. (2015, May). Who owns a company?. In Speech, University of Edinburgh
Corporate Finance Conference, May 22nd.
Iyer, E. (2013). Theory of alliances: partnership and partner characteristics. In Nonprofit and
Business Sector Collaboration (pp. 48-64). Routledge.