Alternative Business Structures – Sole Traders, Companies, Partnerships, Trusts and Associations
This week’s topic deals with the various structures of a business that consists of partnerships, sole traders, trusts, associations and companies. The journal states that the structure of a business plays an important role as choosing the right structure is essential for the running of the business. The structures that have been mentioned above are known as the most common structures, which an organization should undertake. I believe that the easiest form of business refers to sole tradership where an individual alone takes care of the entire business and carries out the duties and responsibilities accordingly. According to me, this is the most simple form of business structure that should be followed. On the other hand, a partnership form of business refers to a situation where two individuals carry on a business together as per the journal. In a partnership form of business, the two individuals who are associated with the organization will be held liable for both profits and losses. It will be shared equally between them. As per my knowledge, the organizations are referred to as those companies that include shareholder, employees and directors. They are said to have a separate legal entity and hence the company will be treated to be a different character than its members. As per the journal, associations are formed by a group of individual and trust is directly related to the company. In my opinion, a business structure must be either a sole trader or a partnership.
A Company is also known as an organization that is incorporated and registered under the Corporations Act, 2001. I believe, owning a company means having proper responsibilities and liabilities. A company is however said to have a natural debt based on which, a corporation can be sued. There is a particular process of registration that is necessary and must be followed in Australia. A company is said to have incorporated if only it has completed the registration. An organization will be registered also based on what kind of company it actually is, A company can either be a public or a proprietary company. Therefore, it can be said that the Corporations Act, 2001 governs all the existing companies of Australia.
A Company can be constituted as per the provisions and legislations of the Corporations Act, 2001. As per my knowledge, a company should follow the relevant steps that are required for the formation of a company. Therefore, the basic step is to prepare a formal document that will state the necessary rules of the company. A company must consist of members, directors and shareholders who are said to be linked with an organization. Once a corporation or an organization is created, all the significant rules and regulations should be applied. In my opinion, a company cannot be formed if it has not been registered. However, a company is said to have a proper relationship with all its existing members.
From the journal, it has been observed and hence I believe that the promoters and third parties play a role in influencing a company. It is the duty of the company to deal and manage with the promoters and outsiders of the company. I believe that a company cannot enter into a contract with any other individual who is treated as a third party. However, if the third party is said to be an agent then the company can form an organization with it. After the formation, only the company will have the right to take the decisions and not the agent. The agent cannot exercise the rights of the company. The authority of the company is either expressed or implied in such a scenario in my opinion. The promoters on the other hand will always be held liable for its activities.
Companies and Incorporation
This week’s lecture state that the ultimate authority and voting right lies with the members of the company. The general process of the voting system states that it helps in taking major decisions for the company. The journal explained the fact that the dividends are taken care of by the members who are involved in the process of trade. In my opinion, the dividends are received by the shareholders and hence it is the duty of determine in which method the dividend should be cleared off. The powers and dividends are therefore depend on the number of members involved.
The role of corporate governance is to manage the activities of the corporation as per my belief. The purpose of corporate governance is to associate with the interests and actions of the company. The basic interests of organizations are to take care of the customers, suppliers, shareholders. However, the government also plays a significant role in the activities of the corporation. Having a management in the company is essential as well since its duty is to direct and manage the affairs of the company. Thus, it is the duty of the management to take the necessary steps while making the strategic planning. Corporate governance and corporate management complement each other as neither can work without each other.
The lecture of this week stated that as per the Corporations Act, 2001 directors of a company are assigned with a set of duties that must be carried out efficiently and ethically. The officers and directors of the company also have legal duties apart from fiduciary duties. Therefore, their set of responsibilities and duties must be performed ethically. As per my knowledge, the directors engaged with the organization should be honest and must have good faith while dealing with the activities. The officers or the directors will commit breach of duty only if they fail to carry out the activities and duties in good faith. I believe the directors will therefore be held liable for their illegal actions and the legislation of Corporation Act, 2001 will be applicable.
For carrying out the business, the process of financing is essential as it produces funds for all the necessary actions of the organization by making the correct investment and purchase. According to me, the purpose of financing is to produce the capital money before starting a business. The capital transaction is made at that moment. However, this capital money can be raised if there is equity financing and therefore it will help in financing as well. Ownership of a company is said to be completed once the process of registration is completed as per the provisions of the legislation. In my opinion, the shareholders deal the shares of the company. The interest of the company is vested upon the shareholders as well. The role of debt arises when there is an involvement of any kind of bank loan.
It has been observed from the articles that there are available remedies for the directors and other officers who are associated with the company. Remedies can be applied only if there is any kind of breach in the duties of the directors. In my perspective, the remedies act as a merit for the directors. However, a minor if engaged with the company has the authority to claim for remedies in chances of any oppression.
References
Ball, J., 2015. The Interaction Between Company Law and the Law of Succession in England. In Company Law and the Law of Succession (pp. 171-195). Springer, Cham.
Buckley, P.J., Sutherland, D., Voss, H. and El-Gohari, A., 2018. The economic geography of offshore incorporation in tax havens and offshore financial centres: the case of Chinese MNEs: Networked Multinational Enterprises in the Modern Global Economy. In The Global Factory. Edward Elgar Publishing.
Ciepley, D., 2017. Member corporations, property corporations, and constitutional rights. The Law & Ethics of Human Rights, 11(1), pp.31-59.
Hall, T.P., 2016. Introduction. In Before Middle Passage: Translated Portuguese Manuscripts of Atlantic Slave Trading from West Africa to Iberian Territories, 1513-26 (pp. 17-58). Routledge.
Jennings, S., Sahan, E. and Maitland, A., 2018. Fair Value: Case studies of business structures for a more equitable distribution of value in food supply chains.
Lipton, P., 2017. The Introduction of Limited Liability into the English and Australian Colonial Companies Acts: Inevitable Progression or Chaotic History. Melb. UL Rev., 41, p.1278.
Lowry, J.P. and Dignam, A., 2016. Company law (pp. 1-491). Oxford University Press.
McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional investors. The Journal of Finance, 71(6), pp.2905-2932.
Spiess-Knafl, W. and Scheck, B., 2017. Financing Instruments and Transactions. In Impact Investing (pp. 111-134). Palgrave Macmillan, Cham.
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