Partnership
Introduction
This report will discuss the business structures of the partnership firm and the company. The company and partnership are two different types of business structures. They business types vary from each other. The corporation is a separate legal entity whereas a partnership is made of two or more than two persons.
Partnership
The partnership firm consists of two or more than two persons (max. 20) make business much stronger. The partnership is formed to take the business to another level. The partnership has some key elements without this the partnership is not possible. The partnership is formed to carry on business means the business is carried to run for the profit. To run the business is the main motive of any partnership firm. In canny Gabriel Castle Jackson Advertising v Volume Sales (Finance): the partnership was created was made due to the contract was made for finance one-off the concert in a view to earning the profit. They become the joint owners for the arrangement of the tour. The other element is that the business is carried by all the partners as a mutual agency. Every partner is the agent and principal for the other partner. In Checker taxicab Co Ltd v Stone case, the court ruled that the checker and the driver are running the separate business and not been considered as a partnership. The other element of the business is the sharing of profits between the partners. If there is an agreement then in accordance with the agreement the profits and loss have been shared by the partners.
Company
The business structure of the company is very different from the other business. The company is required to register in ASIC. The key elements without that business cannot be called as Company. The Company has its own separate legal identity different from its owner’s identities. The shareholders of the company have limited liability. Their liability is limited to the extent of the shares in the company. The shareholders will not be liable for the company’s any act as the company can be sue or sued for their acts. The company can acquire property and can buy shares of other companies from its names. The owners of the companies will have no rights to the assets of the company. In Solomon v Solomon case, it was ruled by the court that the company has a separate legal entity and the company will be liable for the debts and not his owner. Mr Solomon who was the owner of the company held not liable for the debts and the court said that Solomon was the agent of the company and the company as principal. Solomon had made the company with all the requirements. Every member should have at least one share that he has not done any fraud in the making of the company. After this case, the law of modern business has evolved and the company afterwards treated as the separate identity. In Lee v Lee’s Air farming Ltd case, Lee who was the owner of the company was treated as the employee of the company in the court ruling.
Company
Conclusion
It can be concluded from the above that partnership and the company are two different types of business structures. In a partnership there are two or more than two (up to 20) partners are requires. Whereas in the company the owners-shareholders who has the separate identity from the company. They cannot be held liable financially for the company debts.
Introduction
In this report, advantages and disadvantages of a partnership and the company will be discussed and from that, it will be recommended that which alternative is better for the clients. It is necessary to know the business better from its advantages and disadvantages and whether it meet the client requirement.
Advantages of Partnership
- The start-up cost to establish partnership is very low
- It is easy to establish a partnership
- In partnership other costs are low and the reason there is more capital is available for the business
- The partnership has fewer expenses of legal, accounts and requirement of consultants
- The employees of high calibre can be made partners
- The business affairs of the partnership are private
- There is less government interference in the partnership
- It is easy to dissolve the partnership as compared to the company
- The paperwork in partnership is less as compared to the company
- Less reporting requirements
Disadvantages of Partnership
- The partner’s liability in a partnership for the debts is unlimited
- The partners in a partnership jointly and severally liable for the partnership debts and for all the other debts
- Due to every partner is an agent to the other partner because liable for the action of another partner with knowledge or without knowledge
- In a partnership, there is a high risk of disagreements and friction among partners
- The valuation of assets is required whenever a partner join or leave the partnership and it is costly
- The ownership of partnership cannot be changed easily and it leads to the establishment of a new partnership
Advantages of Company
- The company has a separate legal identity and its identity is different from its shareholders
- The liability of shareholders is limited to the extent of his shares
- The shareholders can be the employees of the company
- The company do not affect with the death or retirement of the shareholder, managers and the directors
- The company has separate rights and can buy properties and shares from its own name
- The transfer of ownership of shares in a company is easier
- It will impact good impression on outsiders to be incorporated as a company rather than registering just from the business name
- The company can do business all over Australia after being registered in ASIC
Disadvantages of Company
- The company is costly to establish
- To maintain and to wind up the company is a heavy task
- The financial affairs of the company are public
- The directors have the liability to manage the companies and if in certain cases if they are failed then they can be held personally liable
- There are more legal requirements in the company
The client had a bad experience because of legal and accountancy costs from that it can be recommended by analysing both partnership and the company. The partnership better suits the client requirements. The partnership has less legal and accountancy costs as compared to the company. The partnership is less expensive as compared to the company that helps the client to save money. The partner financial affairs will be private in the partnership and it will not be in the company. The partnership is easy to dissolve whereas there is a complex process to wind up a company.
Conclusion
It can be concluded from the above and from analysing the company and the partnership from the advantages and disadvantages. The partnership is more recommended that the company because it has more benefits in accordance with the client requirements. the partnership has less legal and accountancy cost.
Introduction
The company is regulated by their managers and directors. The directors and managers have the responsibility to run the company in accordance with their duties given in the Corporations Act. In ASIC v Adler case, the director duties and the responsibilities had been breached and how it is breached is presented in this report.
Facts
The HIHC and HIH both lent the $ 10 million to the PEE without the knowledge of the other directors of HIH. HIHC is a subsidiary company of HIH. Adler who is the main defendant was the non-executive director of the company and the shareholder of HIH. PEE that is Pacific Eagle Equity had been controlled by the Adler. PEE becomes the trustee of Australia Equities Unit Trust that was controlled by Adler Corporation. For acquiring shares of HIH, loan of $ 4 million had been used to make a false impression the stock market that they are helping the HIH’s falling share. $ 2 million shares of HIH had been sold for a loss by PEE. For all these all loss investments, the ASIC had accused the Adler for breaching his statuary duties towards HIH along with William who was the CEO and the founder of the company.
Case Decision
The court held and found Adler guilty and convicted for the breach of director duties of Corporations Act under section 180, 181, 182 and 183. HIHC had illegally provided financial assistance of $ 10 million to PEE.
Director Duties
The four director duties of Corporation Act that has been breached by the Adler in ASIC v Adler case, the first duty under section 180 was beached that says the director to show due care and diligence towards the corporation. In ASIC v Adler case, the careful and diligent director would not have allowed providing an undocumented and unsecured loan sum of $ 10 million. The second duty, which was breached under section 181 that says the director, must show good faith towards the corporation and should work in the best interest of the company. In this case, the directors had not shown the good faith and not provided safeguards to prevent from giving $ 10 million loans to PEE. Hence, they had not worked in the interest of the company. The third duty that under section 182 that says director cannot take the advantage of his position for the personal gain. In this case, the Adler took the full advantage of his position and he acts for his personal gain and not for the company. Adler took advantage of his position and requested a $ 10 million loan from HIHC. Williams also breached the section 182, as he was the chief director of the company and misused his position to gain the advantage for Adler. The last section 183 of director duties that says the information that has gained in his duty should utilize properly. In this case, the director has the knowledge of their shares and the poor financial condition of the company. They inappropriately utilized the information and resulted in an insolvent position.
In general, it can say the director has the obligation and responsibility to supervise the management and conduct it in the best way with respect to their duties. A corporation requires a good corporate governance to run the business properly.
Conclusion
It can conclude that in ASIC v Adler case, that the directors had not obeyed their duties to run the company. It is because they held liable for the breach of director duties under the Corporation Act.
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