Research and advise on the principles of partnerships, trusts and company law

Oliver and Emma are business student who met in the year 2013 at CQU. They decided to become business partner and start their business. Their business was to start cloud-based solution in managing the competence. Their facilities would connect the tenants, contractors and owners and also including the business audits, building repair, protection of fire, tendering, reporting and invoicing. Oliver family condition is not good and relies fully upon him. Even Emma has a son whom she financially takes care of him. Due to financial problem Oliver do not want to play a direct role in the business.  However, he has owned four residential properties after investing and has a luxurious home. Whereas, Emma wants Oliver to be the direct partner in her business because being financially being backward and however, Emma did not know that Oliver was sentenced to jail for six years for misappropriation of funds for number of companies.  However, Emma is not aware of such. She believes that the business can flourish a lot. Since Oliver and Emma became the clients of ‘Beanstalk’ firm, they need advice for starting up their business structure.

According to the company Act, a company is defined as the company that is registered and formed where the company is existing. According to Justice Marshall, a company is considered to be person, intangible, invisible and others whose presence occurs in the reflection of law. It includes properties where the establishment refers to the character that is incidental or expressly taken into existence. The characteristics for starting a cloud-based solution business for Oliver and Emma can be of the following:

1. Incorporated Association- A cloud- based solution business can be started if the business the gets registered under the Companies Act.  It comes into existence from the date when its certificate is incorporated. The company will be taken as illegal, if it is not registered. For forming a company that is public, there must be at least seven and for running a private company there must be at least two persons.  These names will be taken to the Memorandum of Association in order to set up with the requirements that are legal in context to registration in order to form a company that is incorporate without or with any liability that doubt being limited.
2. Separate legal Entity- To start a business, Oliver and Emma should have a legal entity. The creditors should recover the money and property of the company. Oliver and Emma cannot sue their individual members. Its property is for benefit of company and not the individual. Neither Emma nor Oliver can claim for any ownership rights in the capital of the company when the company winding up during its existence.

A company is dual in its nature including person separate from its members or association of its members. The cloud based solution business nature includes formalities that are incorporated being satisfied. Here, a new entity appears when it is separate and distinct from shareholders and directors. The nature of the partnership is that when two or more person just like Oliver and Emma join hands in setting up their business and share out their losses and gain. It defines   the relationship between the persons who have agreed to sharing of their business in reference to acting as a whole. The advantages and features that are available to Oliver and Emma in context to partnership are:

• One of the features is that in Partnership there must be more persons against the proprietorship in order to form a partnership firm.
• There must be profit and loss sharing among the partners in the partnership firm
• There must be contractual agreement between Oliver and Emma where the agreement must be written or in oral.
• There must be existence of business that is lawful, If the business is for charitable purpose, then it will not be taken into partnership.
• The business of Oliver and Emma should be in good faith and honesty. There must not be misappropriation.
• Oliver and Emma should follow restriction on the transfer of their shares in order to start cloud based solution business.

The advantages in partnership firm are as follows:

• In order to run an enterprise there must be contractual relation among the partners. Here registration of partnership is needed but is not obligatory.
• Oliver and Emma should have more capital that are available. The proprietors suffer due to lack in their funds. Partnership will help them in overcoming such problems. It helps in increasing the capacity of the firm or business.
• As Oliver and Emma are going to start the business as partners, they should involve themselves in decision making.
• There may be diffusion of risk. In case of partnership, the losses are needed to be shared by their partners as well as in terms of gain also.
• Taxation are available to partnership which are less than company business in context to ownership.

The disadvantages of business are:

• It can have unlimited liability for starting up the business in partnership.
• The partner’s authorities are divided. Here, the partners can discharge their responsibilities in context to individual area. Disagreements between the partners may destroy their partnership.
• Lack of Continuity can be a disadvantage to Oliver and Emma. Withdrawal or death may lead to end of partnership.
• Every partner decision is binded within themselves. So for starting the business a partner who is incompetent may lead to difficulties by taking wrong decision.

The feature of trust allows in transferring the legal ownership of their assets. Trust helps the individual in attaching their strings to the capital that are left to Oliver and Emma that are made in a will. The disadvantages of Trust are:

• Using trust can be a drawback to Oliver and Emma. It requires legal assistance. If any asset is left in the name of an individual at the time of any one of their death, they will not be included as a part of trust.
• Trusts are more complex as to will. It may have to register for a trust checking account in order to start their business.
• Lack of Tax advantage can be a disadvantage to Oliver and Emma. Any income that is earned from the capital trust can be reported on the individual settlor in context to income tax return.

The advantages of trust that are available to Oliver and Emma are:

• Trusts are flexible, complex and varied. It provides protection and limits its liability in context to business.
• Trusts are flexible in case of starting a business for Oliver and Emma. It will help them in clearing taxes at a nominal rate.
• If the trust is discretionary, then it will help them in distribution of their revenue and income among them who are beneficiary to it.
• The beneficiaries of income in context to trust pay tax can get it at their own marginal rate.

Oliver and Emma are looking forward to commence a business according to a partnership deed, and hence they are abided by the set of mutual rights, obligations and respective duties constructed by the Partnership Act.  The rights, duties and liabilities associated with various other partnerships, trusts and companies’ obtainable ion case of Oliver and Emma are as follows:

Advise on the practical and legal features of the various types of corporate and non-corporate business structures

The rights available for Oliver and Emma are-

1. Right to actively participate in everyday management of the business organization.
2. Right to be advised and listened to in case of finalizing any decision related to the firm.
3. Right to obtain access to the books in which the accounts are maintained and demand for a personal copy as per their convenience.
4. Right to divide the obtained profits in an equal manner or any certain order that has been decided among both of them.
5. Right to acquiring of interest on their share of capital that has been contributed by Oliver and Emma to the organization.
6. Right to benefit from the interests of the advance amounts spent by either Oliver or Emma for any organizational purpose
7.  Right to be reimbursed in respect of expenses paid or liabilities suffered in order to protect the organization from any kind of losses.
8. Right to utilization of the partnership belongings primarily in case of any business purpose and not entirely for personal use.
9. Right to denote any kind of inclusion of a new partner or dismissal of any pre-existing partner including Oliver and Emma
10. Right to continuation of business under the organization until and unless either of them personally plans to cease their term of partnership in the firm.
11. Right to opt for retirement consented by the other partner and also accordingly with the set of terms and conditions of the partnership deed.  
12. Right as an agent to cohere the organization for any action taken in the commencement of business
13. Right to legal successor of a partner, in case of death or outgoing.

The duties available to Oliver and Emma are:

1. To lead the business to the highest common advantage – Both Oliver and Emma are bound to lead the business of their organization to the highest advantage. In simpler terms, both of them are bound to apply their skills and knowledge to run the business at its highest potential in order to achieve the maximum beneficiary outcomes from the firm.
2. To maintain a healthy relationship with faithfulness – Both Oliver and Emma must maintain a relationship of faithfulness in order to avoid any kind of misconduct in the business. They must observe great faith and candor towards each other regarding any business activity.
3. Rendering of true accounts – Oliver and Emma must provide true accounts to each other. Every single entry in the book of accounts must be validated by transactional vouchers and the other person is bound to provide a brief explanation regarding the expenditure in case its demanded by either of the partners.

4, provision of accurate information –  It must be ensured by Oliver and Emma that they are not being kept in the dark regarding any business activity, which implies that they maintain honesty with each other and provide full and accurate information to each other without concealing any of it.

1. Diligent attendance towards individual duties – Oliver and Emma are bound to determinedly manage their individual duties in order to maintain a sustainable progression in the business organization.
2. To work efficiently even in case of no remuneration – It is not mandatory that Oliver and Emma are entitled to be awarded any kind of payment for participating in the performance of the business organization. But during commencement, the working partners i.e. Oliver and Emma are to be rewarded with general remuneration as per the business agreement, and also provided commission in many cases.
3. To reimburse for losses suffered by neglect or fraud cases – In case the business organization suffers from any kind of loss because of either Oliver or Emma’s willful neglecting behavioral trait or an act of fraud committed by either of them against any third party, then they are  bound to pay reimbursement to the firm.
4. Sharing losses – Both Oliver and Emma are bound to share the duty of bearing the losses incurred by the business organization in a scenario where they lack an agreement in context to their profit sharing ratio.
5. Duty to function within authority – According to it, both Oliver and Emma are bound to function within the range of authority. In case either of them crosses their extent of authority and it leads to the firm suffering from any kind of loss, then they are liable to compensate for it.

Liabilities of Oliver and Emma to other parties –

1. Liability of an individual partner for the actions taken by the organization – Both Oliver and Emma are equally liable for any action taken by the organization while they remain as partner. Due to the certain liability, a creditor of the organization can legally sue any of them or both at once as a result.
2. Liability of an organization for any action taken by the partner – The whole firm can be held liable in case either Oliver or Emma take any action that causes any loss, harm or suffering any external party.
3. Liability of a retiring partner – Both Oliver and Emma are liable for the actions taken by the firm prior to their voluntary retirement. Although, in case any of them retires they may not be held accountable for the debts and losses suffered prior to their retirement if the third parties and the other existing partner draw an agreement to liberate the retiring partner from all kinds of liabilities. However, a retiring partner must issue a public notice as a part of the process.

The terms and condition are needed to be followed by Oliver and Emma for starting up their cloud-based business. It is recommended that terms and conditions for starting up a business include: –

• Scope-The terms and condition will apply to the current and future business relationship between cloud based solution business and other business. The terms and conditions that are set on a purchaser shall not be binding upon cloud based solution unless it is expressed in writing.
• Entire Agreement- The quotation that are made up by cloud based solution business are available without any obligation in order to change without a notice until the offer is binding. The mutual and oral understanding between the company and Cloud based business need to be confirmed in writing. The cloud-based business deserves the right to correct their errors and communication in making changes in arithmetical and spelling errors.
• Assignment- Unless in a written document it is specified in writing about the partners and cloud based solution business; the obligations of the partners may not be assigned to any third party.
• Prices- If it is not in writing between the partners and the company, and then the payment for such services and goods must be made within thirty days of invoice date.
• Warranty- Unless the agreement is in writing and is required by law, the services and goods without any warranty in context to limitation or for any particular purpose cannot be granted for Oliver and Emma.
• Partial Nullity- The provisions in context to terms and condition is invalid and will not render those as a whole and will be best in accomplishing with the objectives of those provisions that are invalid according to the court law.
• Exports- The software that is licensed to Oliver and Emma by cloud based solution business will not be4 shipped or exported or will not be used in any manner that is prohibited to laws, regulations in reference to business.

Partnership business is recommended as the best type of business structure for Oliver and Emma. This business has dual status that act as limited liability partners and sole proprietorship. This entity is good for those who want to start their business with the business partner, families, friends and others. It helps in sharing their losses and gain that helps in taking decision together that are made in action by the business partners. There may be risk and problems if anyone have wrong type of business. It may affect the future forth that can be anticipated. It will create an effect in the future sale of a business and also may damage while protecting the assets. It may create more tax on the business. The structure makes a business a separate legal entity that has many rights just like general people. A corporation can enter into contract and pay taxes. Even though a corporation can be sued but, the personal assets of the owners cannot be collected.

As an aid to a firm or company, taking into consideration the partnership approach, kit is advised that the areas including potential risk are:

• The loss of autonomy can be challenging to Oliver and Emma in making any decision with the partners before any action has been taken.
• It can be due to the conflict of interest. Where any decision that are right for the interest of the partners may lead to the organizations of the individual.
• By implementing those challenges and by delivering according to the demands in context to reporting, evaluation and others can be taken into granted.
• By having negative impact on the reputation. If Oliver and Emma goes wrong causing damage to the reputation or track records of themselves as an individual by association in order to start up their business.
• The partners need to consider their cost of opportunities and establish against they will measure whether the result of collaborating may take into investment that are making.

Hence, the overall advices given to Oliver and Emma conclude that the legal features of the different types of corporate and non-corporate business structures. It also includes various advices regarding the various risks, problems that come along with the particular structure are hereby provided, and the possible disputes and problematic circumstances that may arise out of partnerships, trusts and corporations have been addressed and advised upon. The ideal business structure that will be the most appropriate option in favor of Oliver and Emma has also been recommended.

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