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The Case Scenario on Business Structures of Obama and Osaka: Assessment Task 2 Answer

ASSESSMENT TASK NO 2 (ESSAY – BUSINESS STRUCTURES)


WorLength: 500-700 words

Task Weight: 15%.

Task Requirements: The ‘Case Scenario’ on the topic of Business Structures’ Assignment Topic - CasScenario (Business Structures)

Obama and Osaka have decided to go into business together. They will be focusing on providing ‘Economical and Healthy Food’ to International Students travelling in Australia during holidays and weekends. They currently have around $150,000 in assets and intend to take out a loan of $200,000 from the OK Bank, to help establish their business. Their projected income fothe first twelve months is around $150,000 but they expect that if they are able to offer high quality and reliable services, their business should be able to grow quicker than that. They are planning to attract investors to become part owners of their Economical and Healthy Food’ business.

Before commencing, Obama and Osaka seek your advice as to the advantages and disadvantages of entering intdifferent types of business.

PROVIDE ANSWERS TO THE FOLLOWING TWO QUESTIONS

Question One:

Provide detailed advice and recommendations to Obama and Osaka as to the most suitable business structure for their new ‘Economical and Healthy Food’  business.

Question Two:

Explain the process and requirements that ‘Economical and Healthy Food’ business will have to follow in order to register the most suitable business structure for their new business.

AdditionaComment:

Students are required to go beyond’ the Prescribed Textbook and to use additional Library resources to support your answers.

Use of Resources

You are required to use a range of legal resources in addition to the textbooks including at least two (2) textbooks and four (4) Online Legal Resources; as supporting evidence for the arguments, analysis and discussion of the two Assignment questions.

CRITERIA USED TO GRADE THIS TASK

See Separate Marking Guide for detailed marking criteria and allocation

Answer

Business Structure

Question 1

There are number of business structures that the Obama and Osaka can choose in operating the business. There are various advantages and disadvantages of business structure that are necessary in identifying the parties to ensure that they are selecting the most suitable business for their business. It is the memorandum of advice such as trusts, partnerships and companies that are available for Emma and Oliver. In this various rights, liabilities and duties associated with the business structures will be analyzed in this essay. 

Partnership

Advantages

  • It does not have complex legal requirements
  • Partners act as agent for each other
  • Easy to establish as compared to other business structures (Ratten, and Dana, 2015)

Disadvantages

  • Jointly and severable will be liable for the act of other partner
  • The creditors in this have the right to sue the all partner or any partner individually
  • The money received by any of the partner will be mutualised with the other partners (Ratten, and Dana, 2015)

Company

Advantages 

  • Corporation has separate legal identity
  • Directors will not been held personally liable for the debts of the company. 
  • Owner personal assets will not been used for paying off the company’s debts
  • The shares of the company are easy to transfer. 
  • The share capital can easily been raised by the companies (Ratten, and Dana, 2015)

Disadvantages

  • It is very expensive to incorporate a corporation
  • A heavy registration fees have to be paid by the members on the registration of the company
  • The financial statements of the company are public. 
  • The liability of the directors will be unlimited on violation of their director duties that is given under the Corporation Act 2001 (CTH) (Burritt, Guthrie, JEvans, and Christ, 2017)

Trust

Advantages

  • Income has been distributed will on of trustee’s discretion to the beneficiaries from the third party creditors (Ratten, and Dana, 2015)

Disadvantages

  • Complex and expensive process of establishment and there are problems that arise in dissolution.
  • There is a difficulty while borrowing the loans and there is a limit of powers in trust deed 
  • A set period of trust has been given in the trust deed and they will be personally liable for the debts of the assets (Ratten, and Dana, 2015)

On seeing the advantages and disadvantages of the three structures it can be advised to Obama and Osaka that they can choose the partnership firm because for the economical business the Partnership will be advised to them. 

Question 2

Partnership 

It is very easy to register a partnership. The legal structure of partnership has been governed by the Partnership Act 1891 (Qld) that provides the key provisions in governing the legal structure. The term has been defined under section 5 of the Partnership Act. The partners are required to register the partnership under the provisions of these laws. The agreement of partnership can be made either in writing or orally. There are various things that are required to do for the contract of Partnership:-

  • Parties name and address of the business
  • Firm name and partners
  • Method of Dissolution
  • Capital in the Partnership (Köhr, Corsi, Capitello, and Gergely Szolnoki, 2016)

Company

If Obama and Osaka will go for company, than they have to go on the Website of ASIC. There is the form which is required to be filled according to the Corporations Act 2001. The company will be registered (Ratten, and Dana, 2015)

Trust

The provision of the trust has been provi0ded under Trusts Act 1973 (Qld). In trust there is required to mention the trustees and beneficiaries (Ratten, and Dana, 2015)

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