Issue 1

The particular issue which the given memo is concerned with the characteristics and the nature of partnership. In addition to this, the advantages as well as disadvantages of the partnership along with the given trust and company as available to Emma and Oliver also needs to be discussed.

The partnership can be described as a business form which involves two parties who form a relationship to carry a single business together. The partnership comprises of two types, the general partnership and the limited partnership.

It needs to be understood by the different individuals that partnership is a simple form of a business which is not quite expensive as well to be set up. The only condition is that the involvement of minimum two individuals is required to form a partnership, whereas the maximum number of partners as involved can be around 100. It is usually believed that the different partners in a business have a liability which is unlimited in nature and not only do they have to be individually obliged towards the partnership but they are also required to be obliged collectively. In a partnership, the different partners usually agree share the profits of the business as well as the losses which have been incurred in the due course of the business.

However, in a partnership the liability of the partners is unlimited and they need to adhere by the debts as well as the obligation of the business. These losses are shared by the different partners in an agreed ratio equation. In addition to this, each partner of the business can be stated to be a principal as well as an agent and they are bound to act in accordance with each other as well as with the firm. The relationships between the different partners may be based on a contractual relation which may be written or applied. The end of a partnership would take place in case of the death of a partner, the bankruptcy of one or either partners and the insanity. It is crucial to be registered for the GST if the annual turnover of the business is above $75000 but cannot be considered to be mandatory to register the firm.

The main advantages of a partnership business can be stated to be the fact that it is easy to establish a firm in partnership and even easier to change the structure of the firm or add partners as and when it is possible to do so. In addition to this, it can also considered to be easy for a partnership to borrow the capital and invest accordingly as it helps in increasing the base of the business. Very often the well performing employees can be made to be the partners of the firm and thereby by forming a partnership it can also be ensured that a business is kept private. Moreover, the profits can be split easily in case of a partnership based on the individual contribution as made by the different partners at large.

Rule

The primary disadvantage of a partner`s liability is that the debt cab be taken to be unlimited in nature. This means that when the partners are unable to pay the particular debt, their personal properties might be impacted. In addition to this, as the partners share a joint liability the debt of the other partners also have to be paid by the former. Additionally, in case the structure of a partnership is required to be changed, it becomes considerably important to divide the firm`s assets accordingly or add which is a troublesome issue.

The trust can be described as an obligation on a particular person to hold a particular asset for the benefit off the other party. In this respect, it can be mentioned that the person who holds the asset or the property for the wholesome benefit of the other individual. In this case, the person who holds the property is known as a trustee and the other one for whom the property is being held is known as the beneficiary.  A trustee can be stated to be an employee who holds an adequate share in the business and ensures that the income derived from the particular business can be given to the beneficiary as per the deed of the trust. In addition to this, trust usually exists when certain families are required to run the particular business.

The primary nature of a trust is that it can be considered to be quite expensive to run a trust. In addition to this, the formal trust deed is the agreement which gives an idea about the operations of a trust. Moreover, it is crucial for the trustee to take administrative tasks easily and be legally responsible for the different operations of the trust at large.

The primary advantages of a trust are that in case of a corporate trust, the liability can be considered to be quite limited in nature and the maintenance of privacy is comparatively easy in a trust. In addition to this, the trust deed can be considered to be a crucial document and the distribution of the income benefits and other are quite different as per the trust deed. The income which is earned through the trust can be understood to be taxed as the general income of the individual.

The main disadvantages of a trust can be stated to be the fact that it is quite complex in nature and can be considered to be quite time consuming. In addition to this, it can also be mentioned that the establishment of a trust can be quite complex and the maintenance aspect can also be difficult. Additionally, the different trusts often face large scale complexities with respect to the borrowing as the nature of the loans are quite complex. Moreover, the trust deed which is formed often limits the power of the trustees.

Partnership

The definition of a company can be stated to be a business structure type which possesses a legal entity which is quite separate which can be considered to be very different from a partnership. Australia has two types of companies which are the public companies who can offer the shares of the company to the public and the proprietary limited companies who are unable to raise money for themselves. The Corporations Act 2001 governs the operations of the different types of company in Australia.

According to Mann and Roberts (2015), the company possesses a separate entity and has a limited liability. The business structure of a company can be considered to be quite complex in nature and comprises of higher set up costs to even set up the firm and to run the firm. The turnover which the company earns belongs to the company and is not distributed amongst the different members or the todirectors.  It is important for the company to register itself with the Australian Securities and Investments Commission (ASIC). The company is governed by The Corporations Act 2001. Like other forms of business, it is important that a company needs to be registered for the GST in case the annual turnover as earned by the company is above $75000.

The different advantages of the shareholders are that the company is quite limited in nature and in order to sell the shares, they are easily transferred. The shareholders of the company are held by the company and any company as registered under the Australian act, can carry out its business in any regions of the country. It is allowed to expand its human resource and capital and the company is liable to pay its own tax.

The primary disadvantage to maintain and establish a company is that there exists large number of complexities in case the company needs to be winded up. Moreover, the financial matters of the company is usually public hence, this leads to a lack of privacy for the firm. In addition to this, the reporting system which needs to be followed by the firm can be stated to be quite complex in nature. Moreover, the different directors are generally held liable in order to pay the debts of the firm. Additionally, the profits of the firm can be taken to be taxable in nature.

The given case is largely related to the case of Oliver and Emma. Hence, if Emma and Oliver adopt the partnership form of the business then in this case, they would be collectively liable for one another`s action. In this case, there exists a joint liability. Moreover, if they make a choice of the trust type of a business then, one would be required to be a trustee and the other would become a beneficiary. Hence, in this case, the trustee would have been required to share the profits of the business to the particular beneficiary which would not be considered to be a suitable case for the business set up. In addition to this, in the case of Oliver and Emma, Oliver would be investing financially whereas Emma has simply planned to invest her time into the case. As there exists equal contribution of the parties, a trust business cannot be considered to be good.  Additionally, a company structure would be good for the firm at large which would then imply that the partners would have a limited liability.  However, as Oliver has had, around six years of imprisonment for the funds misappropriation, it may have a poor impact on the credibility of Emma as well who will then have a hefty personal debt. Hence, in case the business fails to perform well, then the entire business would be a burden and these owners would be liable personally. Hence, the characteristics, advantages as well as the disadvantages of a partnership, company and a trust is considered to be quite essential in order to choose the right business structure for Emma and Oliver.

The Nature and characteristics of partnership

Conclusion:

Hence, having described the nature as well as the characteristics, advantages as well as he disadvantages of a partnership, company and a trust, the different options available to Oliver and Emma were discussed at large.

To: Emma and Oliver

From: The Beanstalk business consultancy firm

Subject: Legal advice in regard to the rights, duties and liabilities of the partners

The second issue relates to the determination of the duties, the rights as well as the liabilities which are generally associated with the different partnerships, trusts and the companies, the choice of which is available to Emma and Oliver.

In the given section, the rights, duties and the liabilities of a partnership form of a business have been discussed.

The different partners possess the right to participate and conduct the different business cases. Moreover, they also possess a right to take the decision for the business and have an access to the books of accounts of the firm. Moreover, they are also given the authority to enjoy the profits of the business in a ratio as greed during the partnership agreement or as per their capital contribution. In addition to this, the partner can be stated to have the right of indemnifying the different expenses that are undertaken by them in the normal course of business.  The partnership property can also be used by him in the normal course of the business. Moreover, in case there is an emergency, the partner possesses the right to bear the decision making decisions alone. Moreover, in case the partner has some actions which are incorrect or so before the partnership, he cannot be held liable for it. It is up to the partner to decide upon the time when he needs to retire. Lastly, in case a partner decides to leave the business, he does possess the right to re-invest his money in similar avenues.

It needs to be noted that the partners in a partnership possess unlimited liability and that not only are they required to be collectively liable for a business but they are also individually liable for a business at large. As the principle of a joint liability is stated, it mentions that a partner is liable for any act or omission which has taken place from the side of the other partner also. In addition to this, the partner would be liable in case there is a debt taken by another partner. The personal assets of the different partners are also under considerable risk if the firm is unable to pay its debts. Moreover, it is the duty of a partner to have a separate Tax File Number as well as an Australian Business Number for the purposes of the business. Additionally, the partners are liable to pay the personal income tax as well because the partnership on the whole is not needed to pay an income tax. In addition to this, the partners are also required to look after their own superannuation fund as they are not the employees of the partnership firm.

Advantages of a partnership business

The rights, duties and liabilities of a business in case of a trust has been given as follows:

The trustee in a business possess the right to get a reimbursement for all the costs as well as the expenses which he will be making for the trust property as well as for the beneficiary. In this aspect, the beneficiary will be required to fully reimburse the trustee. Moreover, it is the right of a trustee to seek the assistance of a legal adviser and address the court in case of any dispute which takes place in the business at large.  There exists a breach of trust agreement which can be accessed but the trustee at large.  In addition to this, the trustee has the right to claim a compensation for the losses which might have incurred in case there has been a breach of trust which results from the end of a beneficiary.

The beneficiary pf the business possess its own set of rights to receive constant updates and a considerable share of income from the property which has been given for the trust business. In addition to this, the beneficiary should be given a detailed report of expenditure, distribution of finances and other related information as required. Moreover, the beneficiary has a right to take the trustee to the court in case of any breach.  

It is the duty of a trustee not to mix his personal property of the business with any related asset of the trust. In addition to this, he must ensure that a separate account is created which provides the investment details of the firm and he must see to it that the property of the trust is not used for the personal benefits of the trustee at large. It is the duty of the trustee to deal with all the beneficiaries in the same manner and see to it that the property of the trust is invested in the right manner and note details like the tax return receipts, expenditure reports and other related documents.

The primary duty and liability of the beneficiary is that he is required to undertake an understanding of the property and carryout his duties as per the deed instruction. Moreover, he has the liability to check the actions of the trustee regularly and ensure that the trustee is put under a limitation in case he is not able to perform his duties well.  Moreover, it is crucial that the trust has the basic knowledge of the working and related operations of a trust. Additionally, the beneficiary needs to possess a knowledge of how the trust function administers.

Disadvantages of a partnership business

The following rights and duties are present for the shareholders and directors of a company:

The rights of the shareholders and the directors

The shareholder is required to attend the meetings of a company and receive an annual report in lieu of the same.  In addition to this, the shareholder is bound to receive the dividends regularly. Moreover, they are also required to inspect onto the books of the company which may assist them in understanding the performance of the firm. Moreover, the shareholder has the right to charge against the company. The directors in a company have the right to enforce the statutory laws as well as the provisions of the firm so that the regular business can be carried out easily. Moreover, the director also has a right to give an input about the general decision of the board. Lastly, he should be paid a considerable remuneration as agreed and be allowed to hold his position unless he is willing to retire on his own.

As a director is directly involved in the personal activities of the business, the director is personally liable for the losses as well as the debts of the company. Moreover, it is the obligation of a director to continue working even after the company has discontinued being involved in a trade or even after the company has been deregistered at large. However, in case of the shareholders, this is not the case and they are required to be paid. In addition to this, the different members who are the directors of the firm need to have the obligation as well as the liability to ensure success within certain circumstances at large. Very often the director is considered to be personally liable for the different debts in case a solvency takes place and the company gains a loss due to the breach of duties. In case any illegal duty has taken place, the director must take considerable actions.

In the case of Emma and Oliver, if they are bound to choose a partnership business then it needs to be noted that they will be held responsible for each other’s activities and in case a trust is chosen, then the roles interchange and one becomes dependent on the other. However, this should not be the case and as the partners will have an equal contribution in the business they should be able to share the profits adequately.  As stated earlier while Emma will invest her time, Oliver will invest the finance which does not make them suitable for the trust. It can be thus stated that only the company structure will be suitable for the company will be the company structure but it should have a condition of limited liability. Hence, deciding upon the rights, liabilities and other duties of the business can be considered to be essential with respect to the firm`s operations.

Trust

Conclusion:

Hence, the given section discussed the rights, duties and the liabilities which are associated with the partnerships, trusts as well as the companies which are available to Emma and Oliver.

To: Emma and Oliver

From: The Beanstalk business consultancy firm

Subject: Legal advice in regard to the best structure for Emma and Oliver.

The given issue is to recommend with adequate reasons, the best business structure which can be adopted by Emma and Oliver.

From the analysis, it can be witnessed that a trust generally places an obligation on an individual to hold the specific property for the benefit of the other party. In this manner, the trustee would be running the business and the beneficiary would witness the fruits of the business. This form of a business is generally considered to be a better form of a business for those parties where a trust is required to be shared within a family. In another way, a company is a typical business form as present in Australia and either the company can take the form of a public company or take the form of a proprietary limited company.  A company has a formal planning and means serious concern. In addition to this, the Corporations Act of 2001, largely governs both the companies at large. Moreover, a trust company acts as a trustee for the beneficiaries and in a scenario where there are no family members present, this business does not function well.

In the given case, it can be understood that Emma and Oliver need to form a proprietary firm which needs to have the characteristics of a private company and based on this it would be able to gain the disadvantages of a private company. With respect to this, it would be required to follow the Corporations act. The directors as well as the shareholders as involved in the particular set up would be required to have the same rights as well as the duties as possible. Moreover, in their absence, Oliver and Emma can engage in assigning a trustee to look after their operations on their behalf. The best business stricture for the given case should be the formation of a company where Emma needs to be appointed as a Director and Oliver can be made a passive investor. In the case of Oliver, the elderly mother and the disabled child can be the beneficiary of the trust company and for Emma `s son can be made the beneficiary. In this way, they would largely benefit from the operations of the firm.  

Conclusion:

Hence, in order to present a summary of the analysis, it can be understood that the best stricture for Oliver and Emma will be that of a company where Oliver can be the investor and Emma will be the Director.  It is also recommended that the company is set up in the form of a trust whereby the dependent family members of Oliver and Emma would be able to enjoy the benefits of the firm in the form of my beneficiaries.

References and Bibliography

Article/Book/Journal

Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal environment. Cengage Learning, 2018.

Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. Nelson Education, 2014.

Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and cases in the legal environment. Wolters Kluwer Law & Business, 2015.

DeMott, Deborah A. “Relationships of Trust and Confidence in the Workplace.” (2014) Cornell L. Rev.100: 1255

Dowling, Robyn, and Jennifer Kent. “Practice and public–private partnerships in sustainable transport governance: The case of car sharing in Sydney, Australia.” Transport Policy 40 (2015): 58-64.

Haldane, Andrew. “Who owns a company?.” (In Speech, University of Edinburgh Corporate Finance Conference, May 22nd. 2015)

Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. “Commercial applications of company law.” (2013)

Iyer, Easwar. “Theory of alliances: partnership and partner characteristics.” (2013) In Nonprofit and Business Sector Collaboration, pp. 48-64. Routledge

Mann, Richard A., and Barry S. Roberts. Business law and the regulation of business. Nelson Education, 2015.

Pozen, Robert C., et al. “trusts&trustees.” Trusts & Trustees18.3 (2012).

Wilkins, Thomas S. “From strategic partnership to strategic alliance? Australia-Japan security ties and the Asia-Pacific.” asia policy 20 (2015): 81-112.

Legislation

Corporations Act 2001

Websites

Company (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-types/Business-structures/Company>

Directors’ Liabilities When Things Go Wrong | ASIC – Australian Securities And Investments Commission (2018) Asic.gov.au https://asic.gov.au/for-business/your-business/tools-and-resources-for-business-names-and-companies/asic-guide-for-small-business-directors/directors-liabilities-when-things-go-wrong/

Partnership (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-types/Business-structures/Partnership>

Partnership (2018) Business.vic.gov.au <https://www.business.vic.gov.au/setting-up-a-business/business-structure/partnership>

Trust (2018) Business.gov.au <https://www.business.gov.au/Planning/Business-structures-and-types/Business-structures/Trust>

Trust | Small Business (2018) Smallbusiness.wa.gov.au <https://www.smallbusiness.wa.gov.au/business-advice/business-structure/trust>