Legt2741 Week 4
Week 4 Tutorial - Types of Business Associations
Partnership
Complexity
The process of establishing a partnership is informal and inexpensive. Commonly established under a written contract but at times can be established simply without any express oral or written consent, so long as it satisfies the definition outlined in section 1.1 of the partnership act: “Partnership is the relation which exists between persons carrying on a business in common with a view of profit” Advantage(A)
Enjoys financial privacy- no obligation for disclosure of financial information to the public. A
Control: Total control between partners (smith v anderson) A *
Tax benefits for venture capital limited partnerships A
Flexibility
Easily changed, reinforced by section 19 which states “The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing” A
Limited life – as a result of death, bankruptcy etc. D
Suitability for financing purposes
Enjoys greater capital resources compared to sole traders ⋄ increases pool of funds available for financing. However this can also be seen as a disadvantage when compared to companies as they cannot raise funds from the general public and are limited by section 115 of the Corporations Act 2001 to a maximum of 20 partners. A and D
Liability
Unlimited liability (for limited partnerships)
Agency relationship exists between partners as stated under section 5 – a partner has the power to bind the other partners when acting within the normal scope and authortiy of the business. That is, innocent partners may still be liable for the actions of a partner who may have acted in breach of the partnership. Mercantile Credit Co Ltd v Garrod 1962. Disadvantage (D)
Section 9 (partners jointly liable for partnership contracts”: “Every partner in a firm other than an incorporated limited
Partnership
Complexity
The process of establishing a partnership is informal and inexpensive. Commonly established under a written contract but at times can be established simply without any express oral or written consent, so long as it satisfies the definition outlined in section 1.1 of the partnership act: “Partnership is the relation which exists between persons carrying on a business in common with a view of profit” Advantage(A)
Enjoys financial privacy- no obligation for disclosure of financial information to the public. A
Control: Total control between partners (smith v anderson) A *
Tax benefits for venture capital limited partnerships A
Flexibility
Easily changed, reinforced by section 19 which states “The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing” A
Limited life – as a result of death, bankruptcy etc. D
Suitability for financing purposes
Enjoys greater capital resources compared to sole traders ⋄ increases pool of funds available for financing. However this can also be seen as a disadvantage when compared to companies as they cannot raise funds from the general public and are limited by section 115 of the Corporations Act 2001 to a maximum of 20 partners. A and D
Liability
Unlimited liability (for limited partnerships)
Agency relationship exists between partners as stated under section 5 – a partner has the power to bind the other partners when acting within the normal scope and authortiy of the business. That is, innocent partners may still be liable for the actions of a partner who may have acted in breach of the partnership. Mercantile Credit Co Ltd v Garrod 1962. Disadvantage (D)
Section 9 (partners jointly liable for partnership contracts”: “Every partner in a firm other than an incorporated limited