The paper 'Appropriate Business Structure for James & Jane" is a great example of a finance and accounting case study. I am writing this letter to provide you information about the different type of business structure which is present and the most appropriate business structure that you should adopt keeping in mind the nature of business you are undertaking. Type of Business Structure There are different type of business structure which I am providing with so that you can understand the different form of business structure present and is as Sole Trader: This is the simplest form of business structure where an individual controls the business and has all right overall assets and liabilities arising out of the business.
Setting a business as a sole trader would require selecting a business name according to the business registration Act of 2011; getting a TFN number from the tax office and getting an Australian Business Number (ABN) from the Australian Business Register. Since both of you are looking to set up a business together sole trader business cannot be set as there will be only one owner. Partnership: This is a form of business where two or more partners mutually agree to carry on business together or one acting for all.
A partnership deed is entered into which mentions the clauses and terms of the agreement. This is a form of business which both of you can adopt as you can enter into a partnership and carry out the desired business. The profit and loss sharing can be determined by mutual consensus. Joint Venture: This is a form of business structure which is adopted by a business which has a high-risk capital.
In this form of business people with different capabilities come together and combine their skills so that the common objectives can be achieved. A joint venture is usually agreed upon a particular venture and the joint venture ceases once the objective is achieved. The control over the business is determined by the joint committee and each member of the joint venture have an individual liability in case the business underperforms. This is a form of business structure which both of you can adopt but since joint ventures are carried out for a specific objective it is not recommended for continuous business. Incorporated Associations: This is a non-governmental organization and is set up for the purpose of social, sporting and community activities and doesn’ t look towards making profits.
This form of business structure is created for a special purpose. This is a form of business structure which I don’ t recommend you to adopt. Trust: This is another form of business structure where trust is developed and the trustee controls the assets of the business for the benefit of the beneficiary.
The trustee has legal rights over the use of assets and can use it to generate profits for others as well. This is a form of business structure which is not applicable for the type of business you are looking to undertake and is not recommended. Company: This is a form of business structure where a company is formed and is registered under the Corporation Act of 2001. The act provides right as the company has limited liability, has perpetual existence, can sue and can be sued and has the right to hold property.
Two types of companies are formed one is private limited and other is public limited. Private limited companies do not issue shares to the general public whereas public limited do. In the case of public limited companies, the shareholders are the owner of the company but in private limited companies, the members are the owners and have limited liability as towards the company. Both of you can look towards creating a company as it would be beneficial to them and would reap long term rewards. At the present moment you can create a private limited company and in the future, if the business grows then you can raise money from the public by converting the private limited company into a public limited one.