There are different business types through which the individuals in Australia can run their business. This includes sole trader, partnership, company and trust (Legal Vision, 2013). This is the first key decision which has to be made before starting the operations of the business. This decision is made on the type of control one needs to have on the business, the type of business and characteristics of the business form (Latimer, 2012). For Alfred and Gina, the best possible business structure is partnership. Through this report, the reasons for this structure being best for them have been elucidated.
Comparison between different structures
The partnership form of business is suitable for Alfred and Gina as they want to open up a bakery where the cooking work in the bakery would be managed by Alfred and the customer relations and register would be looked after by Gina. There work is properly bifurcated and each partner knows their duties. Further, they owe a duty of faith and trust towards each other and are liable for the actions taken by one another. Partnership form of business structure gives them the freedom to make decision about the partnership. So, by mutually agreeing on a particular topic, they can implement it (Graw, 2011).
In this manner, as they both wish to use the business for helping in the training of the employed youth in the region, they can easily do so by employing them in their bakery. For this purpose, they would not require any permission from the board of directors, as is to be done in company form of business structure for taking key decisions pertaining to the business (Gibson and Fraser, 2014). And even though the profit is not their main motivation, they can use the profits of the company for helping these youth, by unanimously taking this decision.
There are different advantages and disadvantages in a partnership form of business. The first one is that having a partnership form of business, the skills of different people can be brought together for the benefit of the partnership (Abbott, Pendlebury and Wardman, 2007). This is clearly evident in the case of Alfred and Gina as Alfred brings the skills of cooking and Gina brings the skills of customer relations and accounting. Further, Alfred and Gina would not have to bear high costs, which have to be borne in a company form of structure, for undertaking any substantial step. Partnership can be easily formed and does not require the hassles of getting approval for business name, place of business or the need for incorporation or registration of company (Cassidy, 2006).
In comparison to the sole proprietorship, partnership has higher capital availability. Also, the business of Alfred and Gina is such that they do not require a very high capital investment. Also, they can personally contribute the required capital and as they are not concentrated upon profits, the earnings from the firm can be reinvested in the business. They can equally split the business and this would not only promote equality in them, but also would give tax savings, which is not present in sole proprietorship form of business. Alfred and Gina can keep their business affairs private, as unlike a company, they are not required to make their affairs public. Alfred and Gina can also evade the external regulations which are applicable in company form of business structure. And Alfred and Gina also have the option of changing their business structure in the future, without having to go through a plethora of regulations (Seal and Penrith, 2008).
All is not glorious in a partnership form of business and this is the reason why Alfred and Gina need to be informed of the various drawbacks which this business form has. The key drawback is the unlimited liability which would be attracted towards Alfred and Gina by going for a partnership. So, not only will they have to contribute the capital themselves, but they will be personally liable for any breach of the partnership firm and in case of non-payment of debts, their personal assets would be attached in order to discharge these liabilities (Tasmanian Government, 2017).
Australia New Zealand Food Standards Code, or FSANZ, is a key code which has to be adhered in the nation and which relates to the food standards. This code has been designed in a manner to make certain that the food is safe for human consumption and the business is not indulged in misleading conduct for selling its food product. Along with this, the consumers are to be given proper detail about the food item so that they can make informed choices and a proper governing structure is to be adhered to, for being a part of the food industry. In case any of these conditions set out in the FSANZ are not met, Alfred and Gina would be personally held liable for these breaches due to the business form being partnership (Steier and Patel, 2017).
The reason for not suggesting Alfred and Gina sole trader form of business lies in the fact that this bakery business had to be run by Alfred and Gina, which would be two people, and the requirement for sole trader, as the name suggest, is single owner. Also, a company form of business structure is too costly and full of complexities, which are not needed for the business to be conducted by Alfred and Gina. Also, a company form of business would involve a lot of formalities to be fulfilled and different regulations to be followed in a timely manner, which would over complicate the matters for Alfred and Gina. Also, this would allow Alfred and Gina to keep the business private which is a major element in bakery business. And when they want to bring an end to the partnership, they can simply do it by taking a mutual decision, instead of having to go through the lengthy winding up process applicable for company form of business structure (Dagwell, Wines and Lambert, 2007).
Hence, the contentions put forward under this report make it clear that the best form of business structure for Alfred and Gina is partnership as it contains the most suitable features which match the requirements of Alfred and Gina.
Abbott, K., Pendlebury, N., and Wardman, K. (2007) Business Law. 8th ed. London: Thomson.
Cassidy, J. (2006) Concise Corporations Law. 5th ed. NSW: The Federation Press.
Dagwell, R., Wines, G.L., and Lambert, C. (2007) Corporate Accounting in Australia. 4th ed. Sydney, NSW: A UNSW Press Book.
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education Australia.
Graw, S. (2011) An Outline of the Law of Partnership. Sydney, NSW: Thomson Reuters (Professional) Australia.
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia Limited.
Legal Vision. (2013) Business structures – A founders guide. [Online] Legal Vision. Available from: https://legalvision.com.au/business-structures-a-founders-guide/ [Accessed on: 23/08/17]
Seal, J.M., and Penrith, D. (2008) Live & Work in Australia. Lanham, MD: Crimson Business Ltd.
Steier, G., and Patel, K.K. (2017) International Food Law and Policy. Switzerland: Springer.
Tasmanian Government. (2017) Partnership – advantages and disadvantages. [Online] Tasmanian Government. Available from: https://www.business.tas.gov.au/starting-a-business/choosing-a-business-structure-intro/partnership-advantages-and-disadvantages [Accessed on: 23/08/17]