Summary: Appropriate Business Structure

Decent Essays
Rohit, Ariel, Charn and Levi have come across a great business idea to introduce a smartphone app. Furthermore, each of them readies to participate in operating the business in their professional capacity. In determining which business structure suits them most there are certain factors that need to be counted. In which capacity each of them ready to contribute to the business? Which business structure would give the minimum restrictions to their business? What are the gains and losses from choosing that structure? As their intention is to start small and considering the fact that each of them ready engage in business activities the appropriate business structure would be a General Partnership.

S.5 Partnership Act 1958 (Vic) defines a partnership as a relationship between two or more people,
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Limited partnership and Private limited company are the alternatives on the other hand. But non-of they meet the requirements of the students. The Private Limited company has an expensive setup cost and strict legal obligations associated with ASIC under the Corporation act 2001. The ability of adequate funding and access to resources can be identified as advantages, but then again on the other side cost of setup and dilution of power will not satisfy the requirements of the students. On the contrary, forming a limited partnership can be inexpensive, but it limits the contribution of limited partners to the business unlike in general partnership. There is a similar case; Duke Group Ltd v Pilmer (1999)6 where the judge stated that ‘it is not necessary that each of alleged partners should take an active control in the direction and management of the firm’. However, in this case, each of them ready to contribute to the business in their professional capacity identically in order to achieve a common goal which can be possible achieved in general

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