Analysis of Partnership Structure for a Bakery Business: Report

This report examines the partnership structure for a bakery business proposed by Alfred and Gina. It begins with an introduction to partnerships, highlighting their advantages over other business structures, particularly for new entrepreneurs. The report details the ownership structure, administrative costs (including raw materials, capital, and logistical expenses), and the rights and liabilities associated with the partnership. It emphasizes the importance of a written partnership agreement and outlines the fiduciary duties of partners, including the duty of fair dealing, good faith, and loyalty. The report also covers the duties of care and the presumption of fraud or undue influence. The report concludes with a discussion on how the partnership should be structured, including the distribution of income and losses, annual partnership returns, and the key features of this business structure, along with a comprehensive list of references.

Running head: BUSINESS STRUCTURE
1
Business Structure
Name:
Institution:
Date:

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PART A
Introduction
In this case, Alfred and Gina are trying to set up a partnership business where the bakery
business that they will operate in the community is expected to be successful and rake in a lot
of profits. It is important to note that partnerships are completely different from any other
business set up like sole proprietorship, company and corporative society (Walden & Thoms,
2007). Partnership has many advantages over all the other structures of business and has
many merits that are considered when starting a business.
In recent years, becoming an entrepreneur has been one of the first stances in business
progress. Alfred and Gina have started a bakery and the best business structure to start is the
partnership business (Tesmer, 2002). At the beginning of the road, partners are clear about an
idea, but they do not always know how to deal with habitual problems that are encountered,
such as the constitution as a partnership, tax advice, etc. so it is not advisable to always start
the road alone but as a partner. The role of partnerships is vital for the support of new
entrepreneurs, in a more economical way.
In partnerships there are many benefits that can be highlighted
Firstly, the information necessary for access to finance (access to credit, interest rates,
financial entities more involved with new projects, access to grants and aid from agencies,
free training schemes for self-employment, agreements and agreements with centers where
they can select personnel in internships or training, in business schools, etc.

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But above all on many occasions the support, the spirit and offer facilities that at the
beginning may be very necessary to start the projects, carry out the first meetings etc
(Steingold, 2006).
But what is the success of an Association based on?
In my opinion it is based on the contribution of the common good and involvement on the
part of the associates. The work of the association can be very positive if the partners
themselves also know how to take advantage of their actions, such as the development of
specific campaigns to support and develop local trade (Shenkman, Weiner & Taback, 2003).
Ownership structure
For this set up, Alfred and Gina are a family. In this case, they will have an equal sharing of
the business and it will be on a 50/50 basis in which the shares of the bakery will be
distributed to Andrew equally as to Gina (Serota & Brodie, 2006). If their sons want to be
incorporated into the business, the will be given some shares and the ownership of the
business will be reconstituted. Upon readmission into the bakery business, Alfred and Gina
can admit any other person into the business whenever they want.
Administrative costs
In a bakery, there are many administrative costs. Firstly, the partnership business will be fully
dependent on Alfred and Gina capital for survival and takeoff. Costs such as raw material
costs like cost of flour, sugar etc. are operational costs that are unavoidable. Capital costs like
costs of equipment e.g. oven and mixer and the leasing of the bakery building can be
borrowed from the bank. A bakery is a capital intensive venture and although the partners

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have injected quite a lot of money for capital, they will also need some help from financial
institutions like banks.
Other costs such as salaries and wages will be met internally until the partnership business
begins to realize some profits (Serota & Brodie, 2006). Other costs like logistical and
administrative costs such as telephone costs etc. are part of the partnership agreement.
Rights and Liabilities
There are various rights that have been encrypted in a partnership agreement. The right to
ownership of the business that is based on the partnership sharing agreement which is written
in the agreement is fundamental. The right to own property in the partnership is also
fundamental (Ashkenas, Kerr, Jick & Ulrich, 2015).The liabilities include any loans, capital
obligations rendered by the banks and any other injection into the business that will require
pay up after a certain period of time.
Likely partnership size and turnover
Many companies that are formed will genrally crop from being partnerships. There are many
examples of partnerships that have developed to become companies in the world and
especially in Australia. The reason for this is that companies are legal persons by law and
they have their own obligations and liabilities. Unlike companies, partnerships are
ownerships of individual partners and may be disintegrated by the partners will. Many family
businesses in Australia start as partnerships and an example is the bakery business by Andrew
and Gina.
It is not true that we should not associate with anyone because it always ends badly. This
thought is so ingrained in some people and is for nothing more than the simple fear of losing
our investments (Ashkenas, Kerr, Jick & Ulrich, 2015). An partnership business can use other

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key partnerships to help reduce risk by sharing it probably with partners. Good interaction
with key partners is much more than giving them a business card. We must win their support
by making relations between us mutually beneficial (Barnett, Barnett & Barnett, 2008).
Part B
REPORT TO THE SUPERVISING PARTNER
How to structure a partnership
Alfred and Gina White should know the following on Partnerships. First, in a partnership
they are supposed to distribute any loss or income between them. The best thing about a
partnership is that it is easier to set up and inexpensive to operate. Gina and Alfred bakery
will be quite easy to set up. However they need a written partnership agreement, this is a
document that outlines how losses and income should be distributed between the couple and
also how the bakery will be controlled (Barnett, Barnett & Barnett, 2008).
Although the agreement is not essential for the business to operate, Alfred and Gina should
know that it is a good idea not to ignore this document. This is because, a partnership
agreement may help to prevent any future disputes and misunderstanding that normally arises
from the entitlement that each partner feels he brings into the business.
In terms of partnership, the profits may not be distributed equally among them. It is the
discretion of the partners( Gin and Alfred ) to decide on how to share the profits from the
bakery. It is important for tax purposes if the partners do not share the profits and losses of
partners equally.
Gina and Alfred are not employees(that is if they decide that the business structure of the
bakery will be partnership) (Barnett, Barnett & Barnett, 2008). However, they are allowed by

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the law to employ other people as the business requires. This is a perfect way to start
offering training to the unemployed youths as they wish . The partnership is required to pay
superannuation for the employees and the partners are also responsible for their
superannuation.
The key features of This type of business structure(partnership)
 The bakery’s control , income and loss are shared between Gina and Alfred
 The partnership must submit annual partnership returns because it has its own
TFN,and they must show all deductions and incomes from the bakery according to the
law.
 Gina and Alfred should also apply for an ABN and use it for all business dealings.
 The business has no legal entity from its partners( Gina and Alfred White). This
means that the partners and the bakery cannot be separated hence, if the partners
acquires a liability and are unable to pay, then the assets of the business can be sold
off to pay the debt.
Duties of a partner
Fiduciary duty
Gina and Alfred are expected to be fair, honest, loyal and act in good faith to one another
(Fontana, n.d.). The fiduciary duty expects the partners to act with the highest standards of
care for the benefit of all partners in the business and also the duty to refrain from
misrepresenting, concealment and any other practice that may result into taking taking
advantage of the other partner.
Duty of fair dealing and good faith

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This starts when the partners are in the initial stages of forming the business, it continues
throughout the life of the partnership and extents to the dissolution of the partnership. Even
when the relationships between the partners are strained the partners must continue to
transact all businesses in good faith and fair dealing in relation to the business (Fontana, n.d.).
Duty of loyalty
Gina and Alfred must know that it is the duty of a partner to place the interest of the business(
partnership) above personal interest. A partner should avoid instances where there will arise
from a conflict of interest. If a conflict of interest arise, a partner has a duty to other partners
of disclosing the conflict or refrain from undertaking the transaction.
However, when a partner leaves the partnership, the duty of loyalty is terminated unless there
is an agreement that has been entered by the parties to extend the time frame. Unless there is
full disclosure of information to other partners, they cannot take positional advantage and
benefit from any partnership related transaction (Mariotti & Glackin, 2013).
Duty of care
Partners should cat in a prudent manner when it comes to them performing responsibilities
that are related to the business (Mariotti & Glackin, 2013). Gina and Alfred should know that
when they form a partnership, they are expected to act reasonably, in good faith and
refraining from any instance that may result in a conflict of interest when making decision for
the partnership.
Presumption of Fraud or Undue Influence

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In a claim alleging breach of fiduciary duty for unfair advantage or self dealing, the burden of
proof lies with the partner who has been accused. In a presumption of fraud a partner is
supposed to counter the presumptions by showing that he or she acted fairly and can fully
disclose all material facts to the partne (Radin, Block & Barton, 2009)r. If found guilty, the
partner is responsible to pay up all the losses and can be expelled from the partnership.
Changing Partners’ Fiduciary Duties
Case laws and state statutes are the ones that determine the fiduciary duties of partners. These
fiduciary duties can be changed provided that they are reasonable and are allowed by the state
law (Salaman, 2001). However, it is not possible to alter or eliminate certain fiduciary duties
by agreement. Hence, partners are first required to check the statute law or consult an
attorney to change the fiduciary duties.
Conclusion
In partnership , all partners must understand that they owe duty of care to the partnership,
other duties include loyalty, fair dealing and good faith among others (Ribstein & Letsou,
2003). A partnership is as strong as the trust and commitment that is practiced by each
partner. The partnership Act provides guidelines on how a partnership should be structured
and therefore, the couple should consult get a lot of insight from it.
References
Ashkenas, R., Kerr, S., Jick, T., & Ulrich, D. (2015). The boundaryless organization. San
Francisco, Calif.: Jossey-Bass.

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Barnett, R., Barnett, R., & Barnett, R. (2008). Managing business forms. Belconnen, A.C.T.:
Robert Barnett and Associates.
Booth, R., Hamilton, R., & Hamilton, R. Corporations.
Fontana, P. Choosing the right legal form of business.
Mariotti, S., & Glackin, C. (2013). Entrepreneurship. Upper Saddle River, N.J.: Pearson.
Radin, S., Block, D., & Barton, N. (2009). The business judgment rule. Austin, TX: Wolters
Kluwer Law & Business.
Renou, L. (2006). Partnerships. [Adelaide]: School of Economics, University of Adelaide.
Ribstein, L., & Letsou, P. (2003). Business associations. Cincinnati, Ohio: Anderson.
Salaman, G. (2001). Understanding business. London: Routledge in association with the
Open University.
Serota, S., & Brodie, F. (2006). ERISA fiduciary law. Washington, DC: Bureau of National
Affairs.
Shenkman, M., Weiner, S., & Taback, I. (2003). Starting a limited liability company.
Hoboken, N.J.: Wiley.
Steingold, F. (2006). Legal forms for starting & running a small business. Berkeley, CA:
Nolo.
Tesmer, J. (2002). Your perfect business match. Franklin Lakes, NJ: Career Press.
Walden, M., & Thoms, P. (2007). Battleground. Westport: Greenwood Pub. Group.

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