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Advantages and Disadvantages of Company and Partnership Structures

1.You and four friends (James, Peter, Graham and Roger) have decided to put together a Beatles tribute show and plan on having it ready for the upcoming “Pop Memory Festival” to be held in Adelaide in July this year. As it is your four friends that sing and look like the Beatles they will be the performers and you will be their Manager. You are investing $10,000 in the tribute show and the other four $1,000 each.

You have planned an upcoming meeting in which you need to explain to them their financial and legal liabilities relating to either a company business structure or in the alternative a partnership structure.

Prepare a handout to be given to the four friends that provides them with the key advantages and disadvantages of each business structure.

You also need to identify 3 key points to be included in a written partnership in relation to financial contributions and distribution for each person

2.It has been agreed to operate as a partnership.

Peter has shown a great interest in designing a logo for the group and he thinks it will be a good idea to purchase t-shirts with this logo. The logo is similar to this one but shows the actual member of the bands images instead of the Beatles.

He has not discussed this with any other members of the group or yourself. He meets Betty who runs the coffee shop next to the rehearsal room who tells him she has the equipment to make merchandise they can sell at your upcoming performances. Peter is really keen and shows her his design.

Can Peter order the t-shirts without your authority?

If Peter does order the t-shirts without your authority – are you liable for the cost?

3.In addition to the t-shirts discussed in question 2 you have been selling “Apple” t-shirts designed by James. It is designed to resemble the Apple computer logo, with the faces of the Beatles intertwined.

Apple computers have complained to the Australian Competition and Consumer Commission (ACCC) that you are misleading and deceiving the customers into thinking that this t-shirt is a genuine Apple product.

Using relevant legal principles and cases, discuss the Apple complaint and the ACCC powers.

4.At your preview gigs you have paid Justin to be your sound man. He has been given an independent contract in which he is paid $200.00 per gig. You have supplied him with sound equipment but he has used his own lighting equipment. You ask him to wear your Beatles t-shirt at the gigs. At one of the gigs a patron is annoyed how loud the music is and starts an argument with Justin. As Justin comes down from the sound booth the patron punches Justin causing him to have a broken jaw. Justin is in hospital for 2 days and cannot do your next two gigs.

Using relevant legal principles and cases discuss what your obligations are to Justin?

Advantages and Disadvantages of Company and Partnership Structures

1.There are four friends, James, Peter, Graham and Roger who along with self are willing to form a Beatles Tribute show and wanted to perform in upcoming “Pop Memory Festival. The four are the actors and myself was positioned at the post of manager.


The manager is investing $10,000 in the tribute show and the other four $1,000 each.


Now,


There are two kinds of business structures that can be formed amid the five friends.

A company


When a colony is registered then it is an person which has artificial status in law and the officers have distinct personality and is held in Salomon v Salomon & Co Ltd[Salomon v Salomon & Co Ltd [1897] AC 22].


Advantages [ James Nolan. 1996. Australia Business: The Portable Encyclopedia for Doing Business with Australia. World Trade Press.]


i.It has separate legal personality, that is, the acts of the officers are carried out in the name of the company and will not make them personally liable for the same;
ii.Perpetual succession implies that a company is immoral and always exists.
iii.A company has its own personality and thus can enter into contracts on its own behalf;
iv.A company can hold properties in its own name;
v.It can sue and be sued.
vi.The burden of the shareholders of the company is restricted and thus the shareholders are not accountable for personal assets.
vii.The shares are easily transferable;
viii.There are tax benefits.


Disadvantages


i.It is very costly to establish a company;
ii.The ongoing cost is also very high;
iii.The administrative and reporting requirements are numerous;
iv.The directors responsibilities are very high resulting in shareholders loss of control over the company;


A partnership[ Peter Gillies.2004. Business Law. Federation Press.]


The Partnership act 1891 (SA) (section 5) submits that a partnership/association is a business structure which is formulated with the help of two or more persons with a common intention to carry on business with the main aim to earn profits. The main elements of partnership are:
i.2 or more than 2 persons;
ii.Carrying/taking On A Business[Smith v Anderson (1880) 15 Ch D 247]
iii.In Common[Degiorgio v Dunn [2004] NSWSC 767
iv. with a view to a profit


Advantages


i. It is very easy to form a partnership and is not expensive or time consuming;
ii.The nature of the partnership can be caged very easily by entering into an agreement;
iii.There are tax advantages;
iv.There is confidentiality that can be maintained;
v.Partners can easily contribute capital;
vi.Experience professional can be made part of the firm;

Key Points for a Written Partnership


Disadvantages


i.The liability of the partners is unlimited;
ii.A partnership cannot be formed with more than 20 persons;
iii.With too many persons involving in the decision making there are chances of conflicts and loss of control on the management;
iv.It is very difficult to manage across borders;
Now, a partnership can be written or oral. It is advisable that a partnership must be written, in order to clearly understand the terms of the partnership.

Written partnership


A written partnership is something which is formulated on a document specifying the terms and condition. some of the key points that must be made part of the written partnership are:
Key points


i.Financial contributions – That there five partners in the firm, wherein, partner X is contributing $10,000 and the other four, Peter, James, Roger and Graham are contributing $1,000 each.
ii.Profit and loss Distribution – That every partner is sharing profits and losses in the firm as per the contribution made by them that is 10:1:1:1:1.
iii.Salary distribution – That every partner can draw salary which is equivalent to 10% of their profits sharing value.

2.Issue


Whether Peter has any authority to order the t-shirts?


Law


When any two or more persons with a common intention carry on business with the main aim to earn profits then a partnership is created. One of the basic features of a partnership is the creation of agency. An agency is a relationship wherein the principal delegates his power to the agent who is authored to indulge in contractual relationship with the third parties on behalf of the principal provided the acts of the agents are within the authority that is delegated to him[ Paul Latimer. 2011. Australian Business Law 2012. CCH Australia Limited.].


As per section 8 of the 1891 Act, the partners in any partnership are considered to be agents of each other and that of the firm and have the power to bind the firm and all the other partners by his act provided the acts are within the agents/parents authority[Re Ruddock (1879) 5 VLR (IP & M) 51].


A partner has the capacity to bound the other partners by his acts provided the acts that are carried out by him is within the scope of his authority and must involve a transaction that is within the extent of the trade that is carried out by them[Polkinghorne v Holland (1934) 51 CLR 143].


In order to bind the other partners it is necessary that the tars action must be carried out in the usual manner and there is nothing unusual in the same[Union Bank of Australia v Fisher (1893) 14 LR (NSW) Eq 241].

Can Peter Order T-Shirts Without Authority?


Also, the transaction is only binding provided the outsider who is dealing with the agent/partner is under the impression that the partner has the authority to bind the firm and all the other partners by his actions and he has the requisite authority to do so. He must be acting in good faith[Watteau v Fenwick [1893] 1 QB 346.].
The law is now applied.


Application and conclusion


It is submitted that all the five people have decided to carry out their acts in a way of partnership.
Peter designed a logo for the group and thought that the partnership must purchased T-shirts with the logo on it. The logo depicts the images of the band members and not of the Beatles.
Peter meets Betty. Beet is the owner of a coffee shop which is adjacent to the rehearsal room. Peter intends to gave a contract for the printing of the T shirts to him.
It is submitted that Peter has not discussed anything regarding the same to any other members of the group.
It is stated that Peter cannot order the t-shirts without the power of the other members because the acts in which Peter is indulging is not the act which is carried out by the partnership. The partnership is involved in preparation of the Beatles Tribute show and the acts of giving t-shirts for printing is an unusual transaction that is carried out.
Thus, peter has nit the authority and if Peter does order the t-shirts without authority then he is personally liable for the same.


3.Issue


Whether the complaint by Apple has any legal effect?


Law


When any business undertakes any business activity then there are few provisions that must be comply with the same. That is no business must be involved in any kind of false representation.


Section 29 of the ACL specifically submits that no business should make any kind of false representation. A false standard is considered to be made when the representations made by the business makes the consumers to believe that the goods are of[ Paul Latimer, n6.]:


i.particular quality, value, grade, standard, style, compositor, model or have some pre historic existence;


ii.that the goods are novel;
iii.that the goods are accompanies with any affiliation of approval or sponsorship
iv.That some price representation is made which is false.
v.Origin to certain place;
vi.Accompanied with repair facilities which in reality they do not.


In the leading case of ACCC v Harvey Norman Holdings[ACCC v Harvey Norman Holdings [2011] FCA 1407], television sets are ordered by Harvey Norman which allow the people to view AFL and NRL grand finals and which is without any broadcasts of 3D and are not provided in regional centres. Thus, the same was considered to be violation of section 29 of the Act.
Also, as per section 18 of ACL, any person who engages in trade and commerce and makes any misleading or deceptive conduct then the same is prohibited under section 18 of ACL[Energizer Australia Pty Ltd v Gillette Australia Pty Ltd (2002) 193 ALR 629

When any person is found to be in violation of the ACL provisions, then it is administered by the regulatory agencies of the states and territories and the Commonwealth, that is, by ACCC.
The ACCC has the power under section 218 of the ACL to accept the written submission regarding the breach and has the power to impose civil penalties under section 224 of the ACL which comprises of:

Legal Obligations for Merchandise and Injuries during Performances


i.Injunction order under section 232 of ACL;
ii.Damages under section 236 of ACL;
iii.Compensation orders can be claimed under section 237 of ACL.
The law is now applied.
Application and conclusion
It is submitted that the partnership is selling T shirts along with a design ‘apple’ on it. The design is similar with the Apple computer logo with a slight change that the faces of the beetles are also incorporated.


It is submitted that the partnership has make a representation which is false in nature and which makes the consumer believe that the t shirts are of particular quality which in actually it is not. Thus, the complaint by Apple computers that the T –shirts by the partnership is misleading/deceiving the customers into thinking that this t-shirt is a genuine Apple product is correct.
Also, the acts of the partnership is misleading and deceptive in nature and thus is not permitted under section 18 of ACL[McWilliams v McDonald’s (1980) 49 FLR 455 ;].
ACCC has the power to issue injunction orders and can impose damages and compensation upon the partnership.

4.Issue


Whether there are any obligations against the firm towards Justin.


Law


When any employer employees any person then there are two kinds of contract that can be established, that is, :
i.A contract of services – The worker is considered to be the employee of the employer.
ii.A contract for service - The worker is considered to be an independent contractor.
At times it becomes very confusing whether the worker is an independent contractor or an employee. The conventional examination is the control test which submits that if the employer has the right to tell the worker the nature of the job but also how the job is to be carried on, then, the worker is an employee and the contract is for services and is held in Zuijis v Wirth Bros Pty Ltd[Zuijis v Wirth Bros Pty Ltd (1955) 93 CLR 561.].


If a worker is held to be an employee of the employer, then, as per the Workers compensation legislation, the employer is responsible for the recompense and treatment of workers who suffer work-related injuries. Also, under common law, if injuries are sustained by an employee during the employment then the employee has the right to seek compensation from the employer.


The law is now applied to the facts of the case


Application and conclusion


The facts submitted that the partnership has paid Justin to be the sound man.


It is found that an independent contract was given to Justin for an amount of $200.00 per gig. It is submitted that Justin is serving under the contract for service and not under contract of service and thus is not considered as the employee of the firm mainly because:


i.That an independent contract is given to Justin;
ii.That sound equipment is provided by the partnership firm but Justin is using his own lighting equipment.
iii.He was wearing the Beatles t-shirt at the gigs but that does not make him the employee of the partnership firm.
Now, at one of the gigs one of the people gig angry over the sound of the music and had a flight with Justin. The fight resulted in causing injuries to Justin. As he have a broken jaw.
It is submitted that the injury that is caused to Justin when he was not the employee of the partnership.
Thus, the partnership is not liable for the loss that is incurred to Justin.

Books/Articles/Journals
Gillies, P.2004. Business Law. Federation Press.
Nolan, J. 1996. Australia Business: The Portable Encyclopedia for Doing Business with Australia. World Trade Press.
Latimer, P. 2011. Australian Business Law 2012. CCH Australia Limited.
Case laws
ACCC v Harvey Norman Holdings [2011] FCA 1407
Degiorgio v Dunn [2004] NSWSC 767;
Energizer Australia Pty Ltd v Gillette Australia Pty Ltd (2002) 193 ALR 629
McWilliams v McDonald’s (1980) 49 FLR 455
Polkinghorne v Holland (1934) 51 CLR 143
Re Ruddock (1879) 5 VLR (IP & M) 51
Salomon v Salomon & Co Ltd [1897] AC 22
Smith v Anderson (1880) 15 Ch D 247
Union Bank of Australia v Fisher (1893) 14 LR (NSW) Eq 241
Watteau v Fenwick [1893] 1 QB 346.
Zuijis v Wirth Bros Pty Ltd (1955) 93 CLR 561.

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My Assignment Help. 'Business Structures And Legal Obligations For A Beatles Tribute Show' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/mgmt1601-business-law/financial-contributions.html> accessed 14 July 2024.

My Assignment Help. Business Structures And Legal Obligations For A Beatles Tribute Show [Internet]. My Assignment Help. 2020 [cited 14 July 2024]. Available from: https://myassignmenthelp.com/free-samples/mgmt1601-business-law/financial-contributions.html.

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