LAW 205: Analysis of Business Structures for Property Management

This report, prepared for Mr. Bill, examines various business structures available for a new property management business. It begins by defining and comparing sole trader, partnership, and corporation structures, outlining the key characteristics, advantages, and disadvantages of each. The re...Read More

Law 205
Running Head: Law 205 0
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Student’s Name

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Contents
Sole Trader business..................................................................................................................................2
Partnership.................................................................................................................................................2
Advantage of partnership business structures 3
The disadvantage of partnership business structures 3
Corporation................................................................................................................................................4
Characteristics of the company 4
Process to set up a company 5
Advantages of Corporation Structure 5
Disadvantages of Corporation Structure 6
Regulation and reporting............................................................................................................................6
References..................................................................................................................................................8

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A person needs to decide a range of aspects when the same decided to start a business. These aspects
include the nature of the business, the scope of the same, potential partners and so on. One such aspect
is the business structure. A business may be set up under different structure considering the priorities
and concerns of the owner. This report is addressed to Mr. Bill who is seeking details on various
business structures that are available to him for his new property management business.
Staring this informative report, this is to state that at the initiation level, a person may set his under
three structures such as sole trader, partnership firm, and Proprietary Company at the initial level. The
discussion over these structures are detailed below
Sole Trader business
As the name implies, under this business only one person may take part in the management of the
business who is the owner of the business. This person decides all the matters of the business and law
does not make any difference between the business and the owner. It means if the business fails to pay
its liability, the owner may be held personally liable for such debts (Cunningham, Nikolai-HCP, John
Bazley, Kavanagh and Simmons, 2018). Mr. Bill wants to initiate the business with his wife and also
has the plan to involve some of his friends in the subjective business that may not be possible under
this structure. Therefore Mr. Bill cannot pursue the business under this structure.
Partnership
This structure removes the barriers of sole trader business and involves two or more than two people
who work together to earn money and to distribute the same among partners (smallbusiness.wa.gov.au,
2020). However similar to the sols trader structure business of a partnership firm also does not have a
separate identity than the business owners. These owners are known as business partners. The business

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of partnership firm may be operated by all the partners or by one or two on behalf of all. A partnership
agreement is a legal document that determines the rights and liabilities of the parties. This structure has
positive as well as negative aspects that need to be studied. These aspects are mentioned below.
Advantage of partnership business structures
S.No. Pros
1 Business under this structure is easy to set as compared to other business structures.
Partners have to execute partnership agreement for the same and an application of business
name needs to submit to The Australian Securities And Investments Commission
(hereinafter referred to as ASIC).
2 Another benefit is flexibility whereby making a new partnership agreement, partners maybe
add ore remove
3 The business remains easy to operate as very few reporting obligations are there for
partnership firms.
The disadvantage of partnership business structures
S.No. Cons
1 Partners have to divide the profits as well as loss
2 Partners remain personally liable for the debts of the business and this structure does not
provide any security to their assets (James and Thomas, 2020).
3 When adding a new partner to the business, or when an existing partner exits, partners have
to dissolve the existing partnership (Liston, 2019)
4 Many of the government grants do not apply to partnership firms and therefore businesses
under this structure cannot avail them.

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Corporation
Companies may be public or Proprietary companies as per the basis of their ownership. As the client
does not have anyone from the public, hence the discussion will be made on the Proprietary Company
(hereinafter referred to as a company). As soon as a company is formed the same becomes a distinct
legal entity that carries a personality different from owners. The owners of business commonly known
as promoters. The important feature of this business structure is that ownership and management of the
business remain in different hands. Promoters need not be a director of the company always. The
Director and officers of the company represent the management of the company. These are some basic
details of company structure and more details about the same have been provided while answering the
specific concerned raised by Mr. Bill.
The first concern of him is regarding the name of the company where this is to state that under
partnership structure he cannot own a business with his name as many people remain involved in the
same as well as the firm is not a separate legal person. However, he may do so while adopting the
company structure. A company can be established with a name following the name guidelines prescribe
by ASIC. As per these guidelines, a company may be registered on the name of the individual but for
the same such an individual is required to be a director of the company. Mr. Bill can include his wife as
co-partner under a partnership business and for that, the same only need to get a business name
registered by ASIC.
Characteristics of the company
A few of the features of the company structure already been discussed above. Further to state that a
perpetual succession is another exclusive feature of this structure according to that a company remains
existence forever until its closure and existence of the same does not get affected by joining or leaving
of any person whether a director or shareholder. Secondly, a company does consider an artificial legal
personality.

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Process to set up a company
Ms. Marry can become part-owner of the company by subscribing to the share capital. Similarly, Steve
and other people would also be able to join the company in the capacity of a director as well as a
shareholder without disturbing the current structure. A company in Australia needs to be registered
with ASIC and for that, some steps are required to be followed. For doing so first the name of the
company should be decided in addition to how a company would likely operate in the future. Here the
business owner has to decide that what rules will regulate the company. At this step, the owner can
decide to develop the company constitution or may choose to adopt the set of replaceable rules offered
by the Corporations Act 2001 (cth) or adoption of both. Further, the owner would also require to ensure
that all the officeholders and directors are aware of their role and responsibility and have their consent
to be appointed on this position. As soon as all these tasks do finish, the business owner/promoter of
the company has to fill the application form for the registration. This is an actual step for the
registration of the company. For different types of companies, different forms are there that may be
accessed through the website of ASIC. For instance, in the case of Proprietary Company, form 201A
needs to fill and submit. This submission must be made to ASIC in addition to the applicable fee.
Similar to the form, the fee is also different for different types of companies. In the case of Proprietary
Company, this fee is $495 (ecompanies.com.au, 2017). ASIC proceed with this registration and send
the certificate of registration, which reflect the formation of the company.
Advantages of Corporation Structure
In comparison to other business structures, company structure has different pros and cons, which are
further discussed below.
S.No. Pros
1 Directors and shareholder have limited liability
2 Perpetual succession (legalvision.com.au, 2016)

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3 Losses may be transferred from one company to another
4 Conflicts may be avoided and it is a mote legal structure and powers of the parties remain
properly defined
Disadvantages of Corporation Structure
S.No. Cons
1 Directors have a range of duties and breach of any bring huge implications
2 Reporting requirements are higher than other business structures.
3 Formation and dissolution of business is not easy and attract heavy cost
4 It pursues a double tax structure where the first company pays corporate tax on profits an
later on shareholder has to pay income tax on their dividend income (ato.gov.au, 2020).
To address the concern of Ms. Bill, this is to state that company structure shall be able to protect their
personal assets. In addition to the company structure, they can protect their assets under limited liability
structure also that carries features of companies and traditional partnerships.
Regulation and reporting
These different business structures have different reporting requirements and regulations. For instance,
partnership firms used to regulate by partnership legislation of relevant state whereas CA 2001
regulates corporations in Australia. Partnership firms have very minimal reporting requirements as the
same is only required to lodge an annual partnership return with an Australian tax officer. This return
needs to submit to the Australian tax officer and it shows details of all deductions and incomes of the

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business. On a different side, companies have to fulfill many reporting requirements. Firstly,
companies have to file their annual financial reports with ASIC (austrade.gov.au, 2020). Further, in the
case of listed companies, they have to file various other disclosures and return to the Australian Stock
Exchange. Hence, to state that under partnership structure very limited reporting requirements are
there.

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References
ato.gov.au. (2020) Company. [online] Available from: https://www.ato.gov.au/business/starting-your-
own-business/before-you-get-started/choosing-your-business-structure/company/ [Accessed on
03/04/2020]
austrade.gov.au. (2020) Financial reporting in Australia. [online] Available from:
https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/
Understanding-Australian-business-regulation/Financial-reporting-in-Australia [Accessed on
03/04/2020]
Corporations Act 2001 (Cth)
Cunningham, B., Nikolai-HCP, L., Bazley, J., Kavanagh, M., and Simmons, S. (2018) Accounting:
Information for Business Decisions. Australia: Cengage AU.
ecompanies.com.au. (2017) ASIC Fees as of 1st July 2017. [online] Available from:
https://www.ecompanies.com.au/company-registration/asic-fees/ [Accessed on 03/04/2020]
James, N., and Thomas, T.(2020) Business Law. Australia: John Wiley & Sons.
legalvision.com.au. (2016) 3 Key Considerations When Setting Up a Company. [online] Available
from: https://legalvision.com.au/3-key-considerations-when-setting-up-a-company/ [Accessed on
03/04/2020]
Liston, J. (2019) The pros and cons of setting up a partnership business in Australia. [online] Available
from: https://www.listonnewton.com.au/information-centre/pros-and-cons-of-setting-up-a-partnership-
business-in-australia [Accessed on 03/04/2020]
smallbusiness.wa.gov.au. (2020) Partnership. [online] Available from:
https://www.smallbusiness.wa.gov.au/business-advice/business-structure/partnership