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Business Structure Analysis

1511 words - 7 pages

This report is aim to advice Sheldon around the best business structure for his business called Australian agricultural services. There are six types of business structures under Australian Law, including associations, joint venture, trust, sole trader, partnership and companies. The report briefly explains the reasons for abandoning associations, trust and joint venture and focuses on the advantages and disadvantages of applying sole trader, partnership and companies. Overall, the report provides the best business structure to Sheldon.

Associations, joint venture, trust

Associations are the business structure for not-for-profit activities (such as sporting or community services ...view middle of the document...

It comes with both advantages and disadvantages.
The first advantage is he has the capacity to enter into legally binding contracts on his own. Which means he completely owns and controls the business. Secondly, Sheldon retains all the profits of his business.
In comparison, the disadvantages are obvious as well. Firstly, a sole trader is not a separate entity. Sheldon equals to the business in law, which means Sheldon is liable for the debts with all of his personal properties, no matter if the properties are gained from the business or not. Secondly, If Sheldon applies sole trader it is hardly to take care of the business in different areas on his own.
Above all, it is not recommended to conduct a sole trader.

Partnership

A partnership is an association of people carrying on business in common with a view to a profit. Partnership simply arises as a matter of law where two or more people are in this relationship. Partnership includes general partnership and limited partnership. They are decided by whether the partners participate day-to-day management and whether partners’ liabilities are limited or not. If and only if the partners do not involve in the daily management and have limited liabilities, it is a limited partnership. If not, it is classified in a general partnership.

As in Sheldon’s case, his families have interests on investing money on the fund of business without involve in the day-to-day management. In the mean time, Sheldon is currently in Cowra, a small town in rural NSW. He plans to hold the opportunities in far North Queensland and Western Australia, corporates with the local warehouses in those states. He might be recommended to create a limited partnership and be the only general partner to run the business.

The first advantage is it is easy to create a partnership. There is no requirement to take any formal legal steps to create a partnership. It is created by contract or conduct. Sheldon can create partnership by signing a partnership agreement with his families who wants to associate with him. Second one is all his family can be beneficial from the business with limited risks that lost the money they invested even in the worst circumstance. That is more attractive to gain more funding assets. Finally, Sheldon are able to control the business on his own as well as the limited partnership can only participate to the management by losing their “limited partner” title and shoulder the unlimited liabilities as Sheldon.

The defects are obviously as well. The first one is more procedure when to sign a contract. The individual partners in a partnership must own the assets of and incur the obligations relating to the partnership’s business personally and in their own names. This means, if Sheldon wants to borrow money to expand the firm’s business, they would each have to sign the loan contract and each would be personally liable for the full amount of the debt on all their investments to the business....

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