LAWS20059: Business Structures - Analysis and Recommendation

This report provides a comprehensive analysis of various business structures available in Australia, including partnerships, trusts, and companies, with a focus on their legal characteristics, rights, duties, and liabilities. It examines the Partnership Act 1891 (Qld), Trusts Act 1973 (Qld), and Corporations Act 2001 (Cth) to highlight the key provisions governing these structures. The report discusses the advantages and disadvantages of each structure, referencing relevant case law such as Polkinghorne v Holland and Solomon v Solomon. It also addresses the rights, duties, and liabilities of partners, trustees, directors, and shareholders, providing a detailed overview of their legal obligations. The report concludes by offering a recommendation for the most suitable business structure based on specific requirements, aiming to assist individuals in making informed decisions when establishing a business in Australia. Desklib provides a platform for students to access similar solved assignments and past papers.

Running head: BUSINESS STRUCTURE
Business Structure

BUSINESS STRUCTURE 1
Question 1
There are number of business structures that the parties can choose in operating the business.
There are separate characteristics that are necessary in identifying the parties to ensure that
they are selecting the most suitable business for their business. It has been evaluated that
legal characteristics that has enabled the parties for ensuring the key factors that assist them
in fulfilling the objectives in managing the business. It is the memorandum of advice such as
trusts, partnerships and companies that are available for Emma and Oliver. In this various
rights, liabilities and duties associated with the business structures will be analysed in this
report as well. In the end, the report a recommendation has been provided to Emma and
Oliver with various reasons in assisting them to choose the best business structure on the
mentioned requirements.
Partnership
The partnership is among the common business structure that has been selected by the parties
for establishing the business in Australia. The partnership business has been created when
there two or more than two partners. The business structure of partnership suits to those who
do not much complex legal requirements. The legal structure of partnership has been
governed by the Partnership Act 1891 (Qld) that provides the key provisions in governing the
legal structure. The term has been defined under section 5 of the Partnership Act. It has been
stated that the legal relationship has been created between two or more parties that have
agreed in various terms in order to carry out business in common with the objective of
earning profit. There are minimum number of partners required to form a partnership is two
and maximum can be 20. The liability of partners is unlimited and they acts as agents for
each other. Some key elements of partnership that is required to comply by the partners as in
the case Polkinghorne v Holland1 that each partner have the liabilities and will be responsible
for the acts of the other partner. In an another case of United Dominions Corp Ltd v Brian Pty
Ltd2 in this case the fiduciary duties of partners has been defined in the partnership3.
The partnership has various advantages as it is easy to establish and the cost of establishing is
less than the other business structures. The partnership has less legal complexities. The
1 (1934) 40 ALR 353
2 (1985) 157 CLR 1
3 William Duncan, Ventures law in Australia (Federation Press, 2012).

BUSINESS STRUCTURE 2
partnership is more strengthen if there are two partners. However the partnership has
disadvantage that the act of other partners will have the liability on all the partners. The
raising of fund is not easier in partnership as compared to other business structures.
Trust
It has been defined under the nature of trust that has been formed between the parties
involving the trust property. It has been recognised by the law that also includes the
contractual rights. A relation of trust of benefits that has been benefitted that it results in the
separating the burden of ownership that includes paying taxes, insurance, managing property
and other from the benefits of the property that proceeds sale, rent, profits or others. The
trustee has been considered as the legal owner of the property and it is responsible for giving
back to the beneficiaries. The provision of the trust has been provided under Trusts Act 1973
(Qld). The relationship of trust shall be express or implied in which the parties are required to
create a trust relationship. The trust structure has some advantages than other business
structure that the income has been distributed will on of trustee’s discretion to the
beneficiaries from the third party creditors. The trust has a disadvantage that it is a complex
and expensive process of establishment and there are problems that arise in dissolution. It is
also been difficulty while borrowing the loans and there is a limit of powers in trust deed, a
set period of trust has been given in the trust deed and they will be personally liable for the
debts of the assets4.
Company
Around the world, it is the most common type of business that has been selected by the
number of people in establishing their operations. The companies in Australia have been
governed by the Corporations Act 2001(Cth). Corporation has separate legal identity that is
the key characteristic by which the parties are preferred to manage their operations. The
separate legal identity has been established in the case Solomon v Solomon5 that the company
is a separate legal identity and have separate legal rights and the directors will not been held
personally liable for the debts of the company. The rule of separate legal identity and the
owner has ben considered as the agent of company that means he is the employee of the
company in the case Lee v Lee’s Air Farming Ltd6.
4 Tomasz Sliwa, et. al, "The application of Vacuum Insulated Tubing in Deep Borehole Heat
Exchangers." (2017). 34 AGH Drilling, Oil, Gas
5 (1897) AC 22
6 [1960] UKPC 33

BUSINESS STRUCTURE 3
Company has various advantages that it is the limited liability and the owner personal assets
will not been used for paying off the company’s debts. The shares of the company are easy to
transfer. The share capital can easily been raised by the companies. There are various
mediums for raising the capital for the company. The death of the owner will not effect on the
dissolution of the company7.
However, the corporation has some disadvantages as well. It is very expensive to incorporate
a corporation through the different medium. A heavy registration fees have to be paid by the
members on the registration of the company. There is a heavy registration fees in the
company that has been paid by the members of the company. The financial statements of the
company are public. The liability of the directors will be unlimited on violation of their
director duties that is given under the Corporation Act 2001 (CTH)8.
Question 2
Partnership
Rights
The structure of partnership gives various rights that are available to the partners that to
manage the operation of the business. There is the right to take part in the day-to-day
activities of the partnership firm. In taking the decision, they have the right to take the
decision of the business. The right has been given to the partners in contributing in the capital
of firm and the interest has been availed in advance that has been paid by the partners for the
purpose of business.
Duties
The main duties of partners are to carry out the operations of the business that have a
common advantage. The duty has been ensured that the use of knowledge and skills in
conducting the decisions for the maximum benefits. The true accounts shall be rendered in
the business and has been provided with full and accurate information to others partners. It
has been attended diligently has rendered the duties while the operation of business has been
7 Amedeo Pugliese, Gavin Nicholson, and Pieter‐Jan Bezemer, "An observational analysis of the impact of
board dynamics and directors' participation on perceived board effectiveness." (2015) 26 (1) British Journal of
Management 1-25.
8 Stephen Bottomley, The constitutional corporation: Rethinking corporate governance (Routledge, 2016)

BUSINESS STRUCTURE 4
conducted. The loss that has been happened in the operation of the business will be shared by
each partner.
Liabilities
The liability of all the partners has been jointly and severally liable for the acts of the partners
that are conducted during its operations. The creditors in this have the right to sue the all
partner or any partner individually. The directors have been held liable for the wrong actions
of the partner. Any wrongful act of nay of the partners can imposed penalties on all partners.
The receiving of the money by any of the partners have the liability of mutualisation of that
money.
Trust
Rights
The trustee rights have been set out in the trust deed that has been executed between the
parties. The deed has been provided the right of the trustee in ensuring the property to the
third parties without the permission of the beneficiaries. The funds that have been allocated
by the beneficiaries will have the liability of the trustees to discharge debts and liabilities of
the business. The remuneration has been seek by the trustee for the services that has been
provided to him/her and the expenses that has been incurred for managing the trust property9.
Duties
There are some key duties of the trustee that he has to maintain is duty of care and will
exercise with all legal formalities with duty of diligence while discharging his/her duties. The
trustee can take decision regarding the investment in the trust fund. It is also the duty of the
trustee that it protects the trust property and avoids conflicts regarding the interest in the
property10.
Liabilities
The liability of the trustee that he must not do any illegal activities that is misuse of funds and
frauds towards the beneficiaries. It is required for the trustee to maintain the trust among the
beneficiaries and proper actions has been taken to protect their interest. The trust has the
9 David Anneken, "Manufacture of glycerine from natural fats and oils" (Routledge, 2018)
10 Vladimir Mazur, et al, "Innovation clusters: Advantages and disadvantages." (2016) 17
International Journal house 315-319.

BUSINESS STRUCTURE 5
responsibility to avoid any type of sham against the trust property and the funding shall not
been used improperly11.
Company
Rights
In the company there are some rights of the shareholders that they will get dividends for the
capital they have invested in the company. The shareholders meeting took place in which
every shareholder can take part and can vote regarding the key issues that has been faced by
him. The annual reports and announcements by the company have the right of the
shareholders to know to receive these announcements and reports that states the action that
has taken by the company. The rights of the director are to ensure that the operation of the
company has been managed in effective manner. The directors have also the right of
remuneration for their role in the company. The shares can easily be transferred from one
shareholder to another and therefore it is the right of the shareholder that they can transfer
their shares to anyone12.
Duties
The duties of directors are to establish a registered office and provide information regarding
the offer of the company to their members. They have the duties that no conflict shall arise
due to their personal interest and therefore they must provide their details to avoid these types
of conflicts. There are certain duties that have to be obliged by the directors as given under
the Corporations Act. Section 180 of the Corporation Act, 2001 provides that the director
must do their duty with care and diligence. Section 181 states that the directors must act in
good faith towards the company and stakeholders of the company. Section 182 states that the
director has the duty to use his position in a proper manner and shall not use his position that
can affect the company. Section 183 states that the information they get due to their position
shall not been misused by them13.
11 Thiago Borges, FCC. Multifunctional Scaffolds for Drug-delivery Therapies. (Western
Reserve University, 2016)
12 Ray Chen, et al, "Dynamic trust management for delay tolerant networks and its application
to secure routing." (2014) 25 (5) IEEE Transactions on Parallel and Distributed Systems
1200-1210.
13 Melisa Pike, Dirk Spennemann, and Maggie J. Watson. "Building use by urban commensal
avifauna in Melbourne central business district, Australia." (2017) 117 (3) Emu-Austral
Ornithology 284-289.

BUSINESS STRUCTURE 6
Liabilities
Shareholders have various liabilities that they have to comply that is timely payment of non
payment of amounts for the shares they are holding. The obligations and liabilities provided
in the Memorandum of Association and Article of Association. It is the constitution of the
company and the shareholders has to obey these regulations and obligations. The directors
and the shareholders acting as directors have to comply with the duties of directors that have
been given under the Corporations Act14.
Question 3
It has been recommended to Emma and Oliver that they should incorporate a company for
managing their business operations. The incorporation of the company will be more
beneficial for Oliver and Emma in comparison with other business structures. In order to
manage the facilities they wanted to start the cloud based solution. According to the business
mnodel they have the plan to provide the services to the management business like the
owners, tenants, contractors and the facilities has been provided of repairing of buildings,
audit of building, invoicing, reporting, management of assets and tendering. Oliver did not
want to active participation in the business but he wants to finance that business. Whereas
Emma does not have funds to invest in the business but she wants to manage the operations
of the business. The requirements of both Oliver and Emma that suits them business structure
like company rather than the other business structures. The majority of the shareholding can
be hold by Oliver and Emma can be the director of the company. They can fulfill their
requirements by incorporating the company and they can achieve their objectives.
The partnership will not suit the Oliver and Emma because in the partnership Oliver will have
to engage in the operations of the business and it will also require for Emma to invest in the
business for becoming a partner. The profits have been distributed among them as per the
investment of the capital in the business. Emma can hold the shares in the business structure
like companies as in the position of director. She can also get shares as remuneration for
acting as the director in the company. The other business structure like Trust will not suit
Oliver and Emma because they do not want to invest in the property to manage the operations
14 Sumit Lodhia, "Exploring the transition to integrated reporting through a practice lens: an Australian
customer owned bank perspective." (2015) 129 (3) Journal of Business Ethics 585-598.

BUSINESS STRUCTURE 7
of business. In the trust the liability will goes on the third party and not the beneficiaries and
the liability has been based on Emma rather than the beneficiaries. The liability in this case
will be on Emma if she acts as the trustee for the Oliver. There is another issue that Olive had
been imprisoned in the year 2005 for the misappropriation of funds for the failure of multiple
companies. Whereas Emma is hiding that two of the creditors have demanded the money that
has been lent to her by sending the letters.
If this happens than trust will not been an option because Emma is acting as a trustee than she
can been held liable for the third parties for the property and also been held liable for her
creditors. Whereas in Partnership they will both have unlimited liability that means they can
be held liable for the debts of the company. So if Oliver will do any misappropriation of
funds as he has done in past can be held liable. Emma will also been held liable for her
creditors of the business as well as her personal creditors. Therefore the company will be a
better option because the owners and company has been considered different and the owners
have limited liability in the company. The companies have different liability and the owners
of the business have different liability. It is therefore Oliver can hold the shares of the
company and Emma can act as the director of the company. The company will not been
affected by the imprisonment of Oliver.
However Oliver and Emma have to some challenges while incorporating the company as they
have to pay the initial cost that is high and they have to comply with the complex legal
requirements. The estimated cost that has been made Oliver and Emma for the business was
to make proliferate in few years that have result that it will increase the revenue of the
company. The business structure of the company is easy to expand than the other business
structures. The raising of capital will be easy in the company rather than the other business
structure by various sources such as they can issue shares and they can take loan from the
company name and can issue debentures. These sources can help the companies in achieving
the objectives that will,. Be beneficial for the Oliver and Emma. Therefore it has been
advised to Oliver and Emma to incorporate a company because these options are not
available in the Trust and Partnership types of business structure.
It can be said that every business structure is different from the other business structures.
Each business structure has some advantages and disadvantages to parties selected by them.
Thus every business has some rights, duties and liabilities that the owners of the business
have to comply with these. However according to the requirements of the Oliver and Emma it

BUSINESS STRUCTURE 8
has been recommended to them the business structure such as company where they can invest
capital and manage the operation properly as per their needs. It has been analysed from teh
advantages and disadvantages of the three structures of the business that the business
structure will be more beneficial for Oliver and Emma.

BUSINESS STRUCTURE 9
Bibliography
Journal/Articles/Books
Anneken, David, "Manufacture of glycerine from natural fats and oils" (Routledge, 2018)
Borges, Thiago FCC. Multifunctional Scaffolds for Drug-delivery Therapies. (Western Reserve
University, 2016)
Bottomley, Stephen, The constitutional corporation: Rethinking corporate governance (Routledge,
2016)
Chen, Ray, et al. "Dynamic trust management for delay tolerant networks and its application to secure
routing." (2014) 25 (5) IEEE Transactions on Parallel and Distributed Systems 1200-1210.
Duncan,William, Joint Ventures law in Australia (Federation Press, 2012).
Lodhia, Sumit, "Exploring the transition to integrated reporting through a practice lens: an Australian
customer owned bank perspective." (2015) 129 (3) Journal of Business Ethics 585
Mazur, Vladimir V., et al, "Innovation clusters: Advantages and disadvantages." (2016) 17
International Journal house 315-319
Pike, Melissa, Dirk Spennemann, and Maggie J. Watson. "Building use by urban commensal avifauna
in Melbourne central business district, Australia." (2017) 117 (3) Emu-Austral Ornithology 284
Pugliese, Amedeo, Gavin Nicholson, and Pieter‐Jan Bezemer. "An observational analysis of the
impact of board dynamics and directors' participation on perceived board effectiveness." (2015) 26 (1)
British Journal of Management 1-25.
Śliwa, Tomasz, et al. "The application of Vacuum Insulated Tubing in Deep Borehole Heat
Exchangers." (2017). 34 AGH Drilling, Oil, Gas
Legislation
Corporations Act, 2001 (CTH)
Partnership Act 1891 (Qld)
Trusts Act 1973 (Qld)

BUSINESS STRUCTURE 10
Case Laws
Lee v Lee’s Air Farming Ltd [1960] UKPC 33
Polkinghorne v Holland (1934) 40 ALR 353
Salomon v Salomon & Co Ltd (1897) AC 22
United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1