Topic 10 SP Part Trusts STUDENT POWERPOINT SLIDES sem1 2015

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Business organisations

CRICOS Provider Code 00301

What to do this week
• Attend a seminar and/or listen to the iLecture
recording;
• Read chapter 10 (pages 291 to 323 and page 331
only) and chapter 11 (pages 337 to 341) of
Understanding Business Law; and
• Do the E-tutorial ‘Choosing a Business Form - Noncorporate Business Arrangements’.

CRICOS Provider Code 00301J

Learning outcomes
After completing this topic you should be able to:
• distinguish the various business organisations
that are found in Australia;
• understand the legal consequences of
operating different kinds of business
organisations;
• understand the terminology used in relation to
different business organisations; and
• explain how different business organisations
are created and operated.

Types of business organisations
• In Australia, a business owner has a choice as to how
they structure and run their business.
• A range of factors must be considered when
determining what type of organisation or structure is
most suitable for a particular business.
• As a general rule, simpler structures are suitable for
smaller businesses and larger enterprises require
more complex structures.
• Each business structure places different degrees of
liability on the business owners and operators.
Important to understand in order to select the best
legal structure for a particular business.

Types of business organisations
• The most frequently used business organisation
structures are:
- Sole proprietorships
- Trusts
- Partnerships
- Companies
• Joint ventures are also quite common (e.g. in the
resources sector) but they won’t be covered here.

Choosing a Business Structure
Things to consider can include:
– size of the business
– risk
– purpose of the enterprise
– requirements of capital (or risk)
– privacy of the enterprise
– whether the business is likely to last for a long
time or even forever

Choosing a Business Structure
Things to consider can include:
– costs of establishing and running a business
– regulation and intervention of the law
– taxation
– control and equality
– ease of transferring the business
– intellectual property

Sole proprietorship

Sole proprietorship
• An individual who owns a business enterprise as a
principal.
• This type of business structure is otherwise known as a
‘sole trader’.
• The simplest way to structure a business for a sole
owner / operator.
• Can trade under their own name or under a different
trading name. Must register a trading name if they trade
under a name that is not their own.
• Can also obtain an Australian Business Number (ABN).

Sole proprietorship
• Completely responsible for all risks associated with
business (unlimited liability)
• No separation between business and personal affairs
• Business is not a separate legal entity
• Unlimited liability
• Initial capital comes from own resources or by taking
out personal loans
• Succession problem
• Sole trader receives profits not wages (pays tax on
profits at individual tax rate)

Sole proprietorship: law governing
No legislation that specifically regulates sole traders
Few formalities required to set up business
Professional qualifications might be required
Registration for GST (must register if annual
turnover is more than $75,000)
• Subject to CCA and ACL (Consumer legislation)





Sole proprietorship: advantages and
disadvantages

Advantages
• Easy to set up
• Minimal regulation
• Greater privacy

Disadvantages
• Difficulty of raising capital
• Higher tax rate for individuals v companies rate
• Unlimited liability

Partnerships

Partnership: A Definition
Partnership is the relation which subsists between persons
carrying on a business in common with a view of profit.
The tests for determining if a partnership exists are whether: • a commercial relationship exists between the parties (an enterprise);
• a common business is...
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