Business Structures And Legal Implications

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Business Structures And Legal Implications

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Business Structures And Legal Implications

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Question:
Discuss about the Business Structures and Legal Implications.

Answer:

Sole Proprietorship:
This is a business organization with the simplest structure. This organization is not complex and it is very easy to set up because it requires very few taxation and legal formalities. A sole trader4 is responsible for all the operations of the business, and he is also responsible for the debts that the business organization incurs, which can be recovered from his personal properties.
Partnership:
This is a business organization that comprises of two or more people who do business together, operating as partners. Under this business organization, the partners share income or profits that they receive from the operation of the business. In a partnership business, the control of a business organization is shared, and the level and manner of control is agreed upon by the partners, in a document called the partnership deed (Farrar 2001). However, it is important to note that members of a partnership are always liable for the debts that the business organization incurs, basically because it is not considered as a separate legal entity.
Joint Venture:
A joint venture involves a business organization where by two or more people come together for purposes of carrying out a single project. This is as opposed to engaging in a continuous business process. For this process to be valid, people forming a joint venture must come up with a joint venture agreement.
A company:
A company is an organization that is regulated by the 2001 Corporation Act, and it is a separate legal entity. This means that the shareholders of a company cannot be held liable for the debts of the company, and it has the same characteristics as a natural person, whereby, anybody can sue the company, or it can be sued. The structure of a company is very complex, and it requires high administrative costs, and it is regulated by a large number of common law principles and the corporation act.
Fiduciary and Statutory Responsibilities
The fiduciary duties that the director has for the company are;

To promote the interests of the company he is working for.
Not to disclose confidential information belonging to the company.
To avoid engaging in any activity that will be seen as a conflict of interest.

The statutory duties that a director has towards a company are,

Avoiding to act in a criminal manner as per section 184 of the 2001 Corporation Act.
Section 588 of the 2001 Corporations Act prohibits the directors of the company from engaging in trade if the company is insolvent.
Section 191 of the corporations act requires directors of the company to disclose any personal information they have which may jeopardize the operations of the business organization.

Directors have a fiduciary duty to shareholders.

They have a duty to advise them during meetings so that they make informed decisions about their investments.
To promote the interests of shareholders during acquisitions and takeovers.

Basic Concepts of Australian Company Law and Analysis
Corporate law examines the manner which different stakeholders of a company are able to interact with one another. These stakeholders are the directors, shareholders, consumers, etc. Countries have different laws that govern their relationships, and a problem normally arises when tow companies coming from different countries have a commercial problem. The issue that arises is the kind of law that will help to solve the conflicts between these two companies. In such kind of a conflict, the law that would be used to solve the problem is where the problem occurred (Wells 2014). For instance, if the conflict occurs in Australia, it is the 2001 Corporations Act that would be used to solve the problem.
Companies normally have shareholders, directors and employees, and these people work together for purposes of ensuring the success of the company. However, there are rules and obligations that have been set up by the common law doctrines and the 2001 Corporations Act that regulate that manner which these people work together. For example, section 256A of the Corporations Act prohibits the directors of the company from engaging in any activity that will jeopardize the interests of the shareholders and the company. On the other hand, the case law of Ooregum Gold Mining v Roper denotes that the directors of the company have the responsibility of protecting the interests of creditors, through desisting from engaging in expensive corporate activities that will lead to the reduction of capital that belongs to the company. This is in a bid to promote the principles of limited liability, which is one of the advantages that shareholders enjoy.
It is important to note that there are always a number of conflicting situations and problems that corporate organizations face, and examples include problems touching on the person who is responsible for managing shares, methods of appointing and dismissing a director, powers of the board of directors, responsibilities of directors, etc. The Corporate Act has been established for purposes of solving the various problems and challenges that corporate organizations are facing (Subedi 2016). Therefore, without the corporate act, it would be difficult to determine the various relationships and roles of different stakeholders in a company.
Problems arising out of the ownership and distributions of shares are another source of conflict in companies. The Corporate Act manages to identify the different types of shares, manner of distribution, ownership, etc. On this note, the Corporate Act plays an important role in ensuring that it solves the various problems affecting business organizations.
Corporate Law and Public Policy
One of the areas where Australian corporate law is currently applicable in public policy touches on the principles of disclosure. Section 672A of the Australian 2001 Corporate Act gives power to corporate regulators such as the Australian Securities and Investment Commission to request disclosures of a company’s financial assets. The intention of this policy is to protect the interest of shareholders, creditors, and to protect the company from recession, that may emanate from poor trading policies.

References
Laws
Corporation Act, 2001 section 256A
Corporation Act, 2001 section 672A
Corporation Act, 2001 section 184
Corporation Act, 2001 section 191
Corporation Act, 2001 section 588
Books
Farrar, J.H., 2001. Corporate Governance in Australia and New Zealand. Oxford University Press, USA.
Subedi, S.P., 2016. International investment law: reconciling policy and principle. Bloomsbury Publishing.
Wells, S., 2014. A Collection of the Laws Which Form the Constitution of the Bedford Level Corporation (Vol. 2). Cambridge University Press.

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