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27 Cards in this Set
- Front
- Back
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Choosing a Business Type |
Different organisations suit different enterprises, considerations would include: -Size of business and risk associated -Risk factors may determine if a separate entity needed -Enterprise objectives: if not for profit, then may use incorporated association -Capital requirements: certain enterprises allow for an accumulation of capital, eg joint ventures -Privacy issues: non corporate bodies are more private and less regulated |
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Choosing a Business Type cont |
-Considerations of the longevity and transfer of the business -The costs of establishing and conducting a business -Regulation and sanctions: lesser regulation applies to particular types of enterprises, eg sole traders -Taxation: usually the operators of non corporate businesses pay tax personally |
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Sole Trader |
-A sole trader (sole proprietor) is a one-person business which is owned and operated by a natural person -Has no separate legal entity -Has unlimited liability -May need to register a business name -Tend to be smaller because of lack of capital and risk involved |
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Registration of Business Names |
In Australia, all business are required to register a trade name via ASIC. Regulated by: -Business Names Registration Act 2011(Cth) -Business Names Registration (Transitional and Consequential Provisions ) Act 2011(Cth) -Business Names Registration (Fees) Act 2011(Cth) |
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Unincorporated Associations |
-Where persons form a club, society or any other not for profit organisation group to conduct some public purpose “enterprise”, eg a football club, without any registration as a company, then it is an unincorporated body -A “not for profit” business may still be seeking to make profits for its public purpose -It must not divide the profits between the members as “dividends”, or it may be considered to be a partnership -Unincorporated associations – have no legal status and cannot own property Peckham v Moore |
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Peckham v Moore [1975] NSWLR 353 |
-Peckham was a footballer -Injured and sued for workers compensation -Club was unincorporated -Committee was held liable by the court -Committee in turn claimed against the club’s funds. |
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Incorporated Associations |
-All States and Territories of Australia now allow an association to register as an incorporated association with the appropriate authority -(Associations Incorporation Act 1981 (Vic) ) -Registration gives the association recognition as a separate legal entity, which in turn provides limited liability to its members and management -An incorporated association as a legal person can hold property in its own right, open a bank account and sue and be sued like any other entity |
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Incorporated Associations cont |
-An incorporated association is NOT a company
-Incorporated associations are regulated by State laws and do not have shareholders
-Incorporated associations must still meet certain statutory requirements, eg hold an AGM, keep records, reporting to authorities etc…..
-Winding up of incorporated association: surplus funds go to charitable organisation not to members |
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Joint Ventures |
-A joint venture is a business agreement whereby separate businesses enter into a binding contract to conduct some project/venture, or undertaking, and share the resulting product or losses in a predetermined manner -A joint venture is not a separate entity (by itself) but is rather composed of a number of separate and independent entities who are not (like a partnership) mutually liable for each other -Contributions into, and share of product from, the venture are determined by the joint venture agreement |
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Joint Ventures cont |
-Different contributions from different parties allow for a maximisation of product: eg concert promotion between a financier, concert promoter, radio station to stage an event -Each party is separate and private from the other – they do not act as agents for each other -If an agreement is poorly drafted then the parties may be liable for each other, and be treated as a partnership Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 |
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Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 |
-Concerned music promotion venture which led to losses -Different parties contributed to management, capital etc. -Parties assumed a joint venture -Court looked at actual relationships, interaction and documentation and held it was a partnership, not a joint venture. -Parties thus mutually responsible for losses |
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Franchises |
-A franchise is a contractual arrangement which allows an individual(s) to sell or distribute goods and services which were created, registered or marketed under some scheme by the owner of the original idea (McDonalds, KFC, Seven- Eleven) -A franchisee purchases the right to distribute a good or service and receives support from the franchisor in terms of advertising, marketing and advice -Franchising is regulated in Australia under the Franchising Code of Conduct through the Competition and Consumer Act 2010 (Cth) (CCA) and the Australian Consumer Law (ACL), and also through the law of contract |
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The principles of partnership law are contained in: |
-the Partnership Acts of the States and Territories; and -the rules of the common law and equity continue in force except where they are inconsistent with the Act -Victoria: Partnerhip Act 1958 (Vic) |
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Nature of Partnership |
-The Partnership Act defines a partnership “as the relation which exists between persons carrying on business in common with a view of profit” (s. 5 Partnership Act) -A partnership implies two things: 1. a business carried on in common; and 2. such business is carried on with a view of profit: |
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Nature of Partnership cont... |
In determining whether or not a partnership exists, the most important factors are: -the intention of the parties, looking at the total facts:Khan v Miah [2000]: a headwaiter and chef wished to commence business on their own account. They acquired and fitted out a shop. Dispute arose. Court held that the relationship was a partnership as fitting out (to supply with necessary equipment) formed the first steps of a partnership -a sharing of net profits accompanied by an agency relationship between the parties |
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Nature of Partnership cont.. |
In addition to the common law rules, the Partnership Act (s. 6) also sets out rules, framed negatively, to which regard shall be had: -common ownership of property -sharing of gross returns -sharing of profits suggests partnership but is not conclusive |
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Joint venture and partnership |
how profits and losses are shared: Canny Gabriel Castle Jackson Advertising P/L v Volume Sales Finance P/L 1974: Court held an alleged joint venture was actually a partnership as there was a sharing of profits as well as other features of a partnership. What the parties call themselves is not conclusive evidence of one undertaking or another: United Dominions Co Ltd v Brian P/L (1985): Participants referred to their agreement as a joint venture . Court deemed it to be a partnership. |
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Creation |
-A partnership may be created orally, in writing, under seal, or inferred from conduct -Under the provisions of the Corporations Act, the maximum number of persons in a partnership is 20, excepting partnerships for certain professional purposes -Certain types of persons have restricted contractual capacity to enter into a partnership including: 1. persons of unsound mind; 2. minors may be partners but they are not liable for partnership debts |
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Creation |
-Those who enter into partnership with one another are collectively called a firm -The name under which the business is carried on is called the firm name and: 1. if the names of the partners are used, the firm name does not have to be registered under the State or Territory Business Names Act; but 2. if the firm name uses additional words, abbreviates the names of the partners, or uses a trade name, it will have to be registered |
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Rights and Duties of the Partners |
-The rights and duties of the partners are usually set out in the terms of the partnership agreement -If no term is fixed for the partnership or is fixed in the partnership agreement but has expired, the partnership is known as a partnership at will -The partners are bound to exercise the utmost good faith in their dealings with one another, creating: 1. a fiduciary relationship of trust and confidence; which in turn gives rise to 2. a fiduciary duty of full disclosure towards each other |
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Rights and Duties of the Partners-Where no agreement is made by the partners, the Partnership Acts set out the following rules to determine the rights of the partners: |
-to share equally in the capital, profits and losses of the firm (s. 28) -to indemnify every partner acting in the ordinary course of the business of the firm (s. 9) -to share in the management of the firm (s. 28(5) ) -not to take wages for acting in the partnership business -not to introduce a person as a new partner without the consent of all existing partners (s. 28(7) ) -differences over ordinary matters of partnership business to be decided by a majority of partners (s. 28 (8) ) -access to partnership books to be kept at the principal place of business and accessible to all partners |
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Expulsion and Retirement |
S. 29: A majority of partners cannot expel a partner unless: 1.power has been conferred by express agreement between the partners; and 2.the power is exercised in the utmost good faith by all partners: -Hanlon v Brookes (1997): an express agreement in the deed of a law firm provided that the singular meant the plural and vice versa. It also provided that it was not necessary for a partners’ meeting to be held before making an expulsion or that the partners to be expelled be included in any deliberations or be present at the meeting for which a decision is to be made. At a partnership retreat, 6 of the 8 partners decided unanimously to expel the other two partners Where the partnership is a partnership at will, any partner may determine the partnership at any time by giving notice of their intention to do so to the other partners |
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Fiduciary Obligations |
A fiduciary relationship of trust and confidence exists between partners, continuing until the final settlement of accounts on winding up: -Chan v Zacharia (1984): A partner in a dissolved partnership which was being wound up obtained a renewal of a lease in his own name without the consent of the other party. Held: He was bound to the partnership in respect of the renewal of the lease -. A fiduciary relationship will also arise where prospective partners enter into negotiations that involve the disclosure of sensitive information: Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] |
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Relationship of Partners with Third Parties |
-Each partner is an agent of the firm and their other partners for the purpose of the business of the partnership -S. 9: The acts of every partner who does any act for the carrying on in the usual way of the business of the firm binds the firm and the other partners unless: 1. the partner exceeds their authority and the person with whom they are dealing knows this; or 2. the person with whom the partner is dealing does not know or believe them to be a partner |
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Relationship of Partners with Third Parties cont.. |
-Provided that nothing is stated in to the contrary in the partnership agreement, the implied powers of partners to bind the firm include: 1. the selling of property and goods of the firm; 2. purchasing goods usually used by the firm; 3. to receive payment of debts and giving receipts; 4. hiring employees; -and if the partnership is a trading firm, ie buying and selling goods: -issue, accept and make negotiable instruments (a document guaranteeing the payment of a specific amount of money, eg. A cheque) in the firm’s name; -borrow money on the credit of the firm; -pledge the firm’s assets; -give an equitable mortgage |
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Liability of Partners – Contract |
ss. 14 & 16 - Liability in contract to third parties: -joint (collective) for all debts and contractual obligations of the firm (NSW is joint and several) -a creditor only has one action against partners as there is only one cause of action |
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Liability of Partners – Tort |
Liability in tort to third parties: joint and several (ie collectively and individually liable) for a wrongful act or omission of any partner acting in the ordinary course of business of the firm, or with the co-authority of their co-partners: -National Commercial Banking Corp of Australia Ltd v Batty (1986): a partner in a firm of accountants fraudulently deposited cheques of a company of which he was a director into the firm’s trust account and misappropriated the proceeds. The question arose as to whether his co-partner was liable. Held: Partner was not liable as the partner was not acting in the ordinary course of the firms business or with the implied authority of his co partner |
