Question 1: (13 Marks)

Rohit, Ariel, Charn and Levi are La Trobe students. They think they have stumbled upon a fantastic business idea. They have designed a smartphone app which gives people basic medical advice to help them diagnose their illnesses. Customers who pay for the premium version of the app also receive step-by-step instructions on how to carry out minor surgery on themselves.

Their intention is to start small, but they hope the app will prove a huge worldwide success. None of them has much money, although Charn’s father (an illegal drug dealer with a long criminal history) is a very rich and is prepared to invest most of the money they need to get the business started. 

Rohit is studying software engineering and developed the software for the app. Ariel is a nursing student and supplied the medical information for the app. Her biggest concern is making sure the risks involved in doing business are minimized. Charn describes himself as a “risk-taker and entrepreneur – just like my dad”. He is an accounting student. He intends to take care of the business side of things. None of the others really like him, but figure they can put up with him. Levi is doing a law degree and says he will deal with any legal issues.

Give Rohit, Ariel, Charn and Levi advice on what is the most appropriate business structure for their proposed business.

Question 2: (12 Marks)

Assume the business was set up as a Victorian partnership. Unfortunately, there are some problems: 

(a) Apparently, selling a product that encourages people to do their own surgery is illegal. The police are investigating and criminal charges are likely. In addition, a number of customers who injured themselves are suing the business for negligence. Rohit, Arial and Charn had asked Levi to look into the legal issues before they started the business, but Levi told them there was no legal problem with running this type of business. 

(b)Rohit has built into the app a mechanism that automatically diverts one half of the sales revenue to him personally. He claims this is fair because the app belongs to him anyway; and 

(c) Charn’s father is demanding access to the business records and accounts and is complaining about not getting a say in the way the business in being run.

Give the partnership legal advice on each of the problems.

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