Elements of a Partnership Firm
Introduction
In this report, the research has been conducted on the business structure of the company and the partnership firm. The company is a separate legal entity according to the law and it has a distinct identity from its owners that can be sued. Whereas a partnership firm that has two or more than two partners. The partnership firm does not have a separate identity from its owners.
Partnership
The partnership firm has two or more people but not more than 20 people but with few exceptions. It is created to make a profit by going together. The partnership firm has three main elements the first is to carry on business that is very different from the carrying on the hobby or from carrying a single venture but a partnership is a commercial flavour that is run to make a profit that is organised in a business-like manner. In Goudberg v Herniman Associates Pty Ltd, the preparatory and explanatory setting of business not been considered a partnership, as they did not constitute carrying on business. The second element is that carrying on a business in common that implies that partners are carrying the business for and on behalf of each other. They presume that they have mutual obligations and rights for each other. They act as agents for each other and every partner has a different role in the company. In Re Ruddock, although Mrs Bear do not take part in the day to day business management and the both Ruddock and Bear treated each other as a partner and this relationship is 0determined by the mutuality of rights. The third element is that every business run is in a view to earning a profit. The businesses have the main motive to earn a profit.
Company
The company has a separate legal identity. The business should be registered with ASIC to call as a company. It is governed by the Companies Act. The corporation has some elements that it has a limited liability that the shareholder or the owners have the limited liability in the company extend to his shares in the company. The owners will not be liable financially liable for what happens to the corporation. The company can be sue or sued for the offences by the law. It has a separate legal existence from its owners. The corporation can come into a contract; it has a legal binding on the corporation. The corporation has its own rights, can acquire property, and can buy shares of other company from its names. In Solomon v A Solomon and Co. Ltd case, Mr A. Solomon was not held liable for the company’s debt and from this case; the concept of separate legal identity had been evolved. The Solomon had made the company with all the requirements. The company had been treated as the principal and Mr Solomon was his agent. The shareholder or the owner has the limited liability in the company. In the similar case Lee v Lee’s Air farming Ltd: Mr Lee who was the owner of the crop laying business died in a flying accident. It was argued by his widow wife that he is a worker under the law and liable for the compensation whereas the state argued that he was the owner so he was self-employed, the court in his ruling said that company has a separate legal identity and Lee should been considered the employee of the company.
Elements of a Company
Conclusion
In conclusion, it can be said that the corporation and partnership both has different business structures. The partnership firm is run by partners, they have mutual consent, rights and the business run for the profit whereas the corporation is different from the partners it has run on its own identity. The corporation has its own rights and it is required to register with ASIC to call as a company.
Introduction
In this report, the advantages and the disadvantages of the company and the partnership firm and from that what it can be recommended to the client. Corporation and the partnership firm from which the business can be benefitted depend on the role and type of business. It is necessary to know the advantages and disadvantages of choosing the business better. In report, recommendation will be provided that which business is better.
Partnership
Advantages
- It is very easy and inexpensive to start a partnership firm
- The partnership firm has less paperwork in comparison to the companies
- There are less reporting requirements that mean it has more privacy in comparison with the company
- The government interference and regulation is less at least compared to the company
- In comparison to the company the partnership firm has less requirement for the hiring of lawyers, accountants and other consultants
- The partnership firm is easy to dissolve, to resign, and recovery of shares.
- In a partnership firm, the partners are not an employee. Superannuation contributions and workers compensation insurance are not payable for the partners.
Disadvantages
- In a partnership firm, the partners have unlimited liability
- Partners are not employees of the business and each partner has the full liability of debt incurred by the other partner with knowledge or without knowledge.
- The profit sharing disputes shall arise between partners.
- The administrative control and business direction disputes can also rise between partners
- It is difficult to change the ownership of the business and that can lead to the establishment of a new partnership firm.
Company
Advantages
- The shareholders or owners have the limited liability
- In a company the transfer of ownership of shares by selling to another party is easy
- The company can employ the shareholders
- The company after registered in ASIC can trade anywhere in Australia.
- The company has the access to wider capital base and skills base.
- The deaths, insolvency and insanity of the shareholder does not affect the company
- The expansion of business is easier compared to the partnership firm
- It has the wider base of membership that divides the risk between all the members
Disadvantages
- The company is costly to establish and to maintain and to wind up
- There are complex reporting requirements
- The financial affairs of the company are public
- The directors can be held liable if they failed to meet the legal obligation for the company’s debts
- As compared to a partnership firm the company has to comply with more legal requirements
- To dissolve the company is a very complex process
It can be recommended to the clients that they can register the partnership firm rather than the company. It is because the partnership firm is easy to create and has less legal and accountancy expenses. The partnership firm is easy to operate and it is less expensive as compared to the company. The dissolution of a partnership firm is much easier than dissolving a company. The reporting requirements of the partnership firm are not much complex whereas in the company the reporting requirements are complex. There are a lot more benefits as compared to the company and that is the reason the partnership firm is more recommended then the company.
Conclusion
In conclusion, it can be concluded that the partnership firm and the company has different advantages and disadvantages but from both, it can be recommended is the partnership firm because it has less complex procedure then the company.
Introduction
In this report, it will discuss the role and duties of directors. Directors are the managers of the company and it is their duty to regulate the company in the proper way and in an honest way. The directors contain the trust of the shareholders. In ASIC v. Adler, this case reflects on the director’s responsibilities and regulations of the company.
ASIC v. Adler (2002)
The main defendant of this case was Adler who was the non-executive director and the shareholder of HIH, and the officer of HIHC. HIHC is a subsidiary of HIH. In June 2000, they provided an unsecured and undocumented loan to the Pacific Eagle Equity (PEE) of $10 million, controlled by Adler. This loan was given without the knowledge of the HIH directors. PEE then becomes the trustee of Australia Equities Unit Trust that has a control of Adler Corporation. Approximately $4 million loans were used to acquire HIH shares on the stock market and the false impression had been made in the stock market that he was helping HIH’s falling of shares. The HIH shares then sold for $2 million loss by PEE and bought various unlisted shares in technology and communication companies worth $ 4 million and $ 2 million was given to Adler under the trust by AEUT. This was all total loss investment. The court held in this case that HIHC illegally provided financial assistance and this action is material prejudice to the interest of HIHC, HIH and the shareholders. Adler had convicted for multiple breaches of the director duties.
Director Duties
In ASIC v. Adler there have been certain director duties had been breached that are under section 180,181,182 & 183 of the Corporations Law.
- According to section 180 that the director to show care and diligence towards the corporation. He has failed to implement these duties as he has failed to provide proper safeguards in allowing HIHC to lent $ 10 million to PEE.
- According to section 181, the director must show good faith, it will think in the best interest of the company and the purpose must be proper. In this case, Adler had not worked in the company’s interest and according to this, the directors will be held personally liable.
- Section 182 defines that the director cannot take advantage of his position to gain for himself or herself or someone else. In this case, the director had taken the advantage of his position and allowed the unsecured and undocumented loan to PEE. Adler took the advantage of his position and benefitted himself.
- Section 183 defines that the directors have the duty to use the information they gain in the course of their duties to gain an advantage for anyone or for the determinant to the company. Adler had taken the advantage and for his personal financial gain and not for the company and resulted in companies insolvency.
Conclusion
In conclusion, it can say that in ASIC v. Adler had been the breach of the director duties of Corporations Act. Adler was held liable for this breach of duties under section 180, 181, 182 and 183. The company was collapsed due to bad corporate governance. From this, it was concluded that for regulation of a company it is important that directors should obey their duties and work for the best interest of the company.
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