Alice, aged 50, took a redundancy package during COVID-19 in 2020, from her job teaching dance at the Drama College. She left the College with $50 000 from the package. Alice sees an opportunity to set up a business which will provide online Zoom conference and meeting attendees with breakout sessions that consist of music and dance exercises. Alice has no digital or marketing experience, but her jogging partner Dave does, and he already runs a company Digital Dollars Pty Ltd. Dave thinks that Alice’s idea is a very profitable one and he suggests that his company could build a website, and set up and roll out a digital marketing campaign to advertise the new business to conference providers and large organisations. He suggests that his company would pay its own costs and in return would take a fixed fee for every new client attracted. He would also like his company’s role in the venture to be acknowledged in any media and documents put out by the business.
Alice’s friend Siyi, with whom she used to be in a dance company, has recently inherited a large amount of money from an aunt. Siyi likes the idea of investing some of that money in dance, and Alice tells Siyi she could use another $50 000 to purchase the most up to date recording equipment and augmented reality applications. Siyi doesn’t want to be involved in or responsible for any part of the business operations, but is happy to see a good return on her investment.
Advice Alice what are the possible business structures she could use, and what are the advantages and disadvantages of each? Which do you advise is the most suitable here?
Explain your answer with reasons for your statements, and using any relevant sections of the legislation, and case law, that you have studied in class.
Sasha and Emi are two friends who met when they worked together as chefs at a famous restaurant in New York, but both have now moved to Adelaide. They have decided to set up their own restaurant which will ‘fuse’ the best of the cuisines of Japan (where Emi was born) and Australia (where Sasha comes from. Each of them has come from New York with $100 000, which they want to invest in the new business.
- They decide that a company would be the best structure for their situation. Sasha and Emi would be the two directors.
They want to reflect their own names in the business so they call it Sashemi.
Advise them what registration steps they need to take to be able to trade as a company, and with this business name
- They decide to issue 10000 $10 shares to each of them, reflecting the capital they have equally contributed.
Emi’s situation is quite straightforward. She is single with no family in Australia. She intends to simply own her shareholding in her own name.
Sasha, on the other hand, has a partner, who is a doctor, and two young children. Before her spell in New York, Sasha and her partner established a Family Trust, and Sasha wants her interest in the new company Sashemi Pty Ltd, to be held through the family trust.
Advise Sasha whether, and if so how, her interest in the restaurant company can be held through the family trust.
- It is one year after the company was incorporated, and business is going well. An important Japanese trade delegation visits Adelaide, and the restaurant hosts a banquet for them. Unfortunately the banquet, designed to showcase local produce, includes a mushroom which may have been poisonous, and was picked by Sasha in the local forest. The husband of one of the visiting delegation becomes seriously ill. He is in hospital for several weeks, which causes great expense and delay, including him missing key acting auditions back in Japan, and causes anxiety to his wife, not to mention embarrassment to the local government.
Emi is for furious with Sasha her careless mushroom-collecting. When the visitor starts proceedings against the restaurant for a six-figure sum, Emi says that as it is Sasha’s fault, Sasha or her family trust should be liable to pay the damages.
If the proceedings are successful, where does the liability to pay the damages lie?
- It is three months after the mushroom affair, and it turns out the restaurant won the proceedings. (An expert witness showed that mushroom wasn’t poisonous to humans, and that the visitor had an unknown allergy to allmushrooms).
However, the publicity of the trial has been really good for Sashemi’s business. They have full bookings for the next three months.
Sasha and Emi now think that they need to open a more informal version of the restaurant, catering for breakfast and lunch in the city and helping with the increased demand.
They need more capital to fit out the new premises in the CBD. They would also like to bring more investors on board and have many friends and customers interested.
Advise them whether they need to convert to a different type of company in order to expand and take on more capital and thus shareholders.