The two business structures that need to be discussed in this case which are partnership and company structure.
Partnership may be defined as a business structure where there are more than one owners having stake in the business and are known as partners. The underlying rights and obligations of partners is outlined in the partnership agreement which is usually written and forms the basis of the partnership. The partnership agreement may or may not be registered. Also, partnership must be for profit purpose only and has common ownership. Some of the key attributes of partnership are highlighted as follows.
Company is a business structure which has shareholders instead of partners and also the number of shareholders can be significantly large. The name of each company is unique and each company has to be registered with ASIC. The various attributes to company are as follows.
The key objective of this section is to highlight the relative advantages and disadvantages of the two business structures which have been introduced above.
For the given clients, considering the nature of business, a partnership firm would be more suitable. This is because the real estate sale business does not involve any significant capital for running the business or expansion of the same. As a result, the business would not need to raise capital. Also, the partnership can be formed easily without any hassle which is not the case with company. This is quite important as this would provide the clients access to the clients and market before the entry of new players and further intensification of competition, thereby making the most of the opportunity at hand. Further, at this start up stage, the owners would like to minimise the overhead expenses which again makes partnership firm a preferable option with no reporting obligations. Also, there are minimal liabilities owing to given business being regulated which make partnership structure a suitable choice to begin which at a later stage may be converted into company.
One of the landmark cases in regards to duties of directors and the consequences of the breach of theses is ASIC v Adler case. This case took place in the aftermath of the noticeable bankruptcy of HIH Insurance which was one of the leading Australian insurance firms at the time. The various takeaways of this case for directors are highlighted below.
References
Austlii, Corporations Act 2001- Sec 182 https://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s5(182).html%3E
Austlii, Corporations Act 2001- Sec 183 https://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s5(183).html%3E
Latimer, Paul, Australian business law, (CCH Australia Ltd, 24th ed., 2005)
Julie, Cassidy, Corporations Law Text and Essential Cases, (Federation Press, 4th ed., 2013)
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