BTC1110 Lecture Notes - Lecture 9: Keith Spicer, Inter Se, Fiduciary
30 Jun 2018
School
Department
Course
Professor
PARTNERSHIP LAW
The two most common kinds of business organisations: partnerships and corporations
and agency principles that affect them both
The choices and central feature of each business organisation:
-Agency – ‘acting through another person’
-Sole trader – ‘going it alone’
-Trust – ‘holding property on another’s behalf’
-Partnership – ‘sharing the pain and the gain’
-Corporation – ‘the legal fiction that rules the business world’
Comparisons:
Agency:
A person who acts in the name of and on behalf of another
All commercial activity relies on agency - one of the genuine cornerstones of business
activity
Examples
-Real estate agent acting as a vendor, a person who buys goods or services on
behalf of another person
-A sales assistant in McDonald's who sells burgers to customers
In relation to p'ships: agency principles are so much a part of the way p'ships work that
they are regarded as a branch of agency law
-One difference - each partner is both an agent and a principal of the others
-Partners can bind each other and be bound by the actions of their partners
-The fidicuairy obligations that the charaterise the duty and agent owes to a
principle flow both ways
In relation to corporations: it is a legal entity
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-Inevitably has to work through agents such as its directors, officers and
employees
Sole Trader:
The simplest form of business organisations: one individual doing business on his/her
own
Most common form of business organisation - does NOTgenerate revenue of the other
organisations
Advantages:
-Simple and inexpensive
-Easy to dissolve
-Lower compliance costs and regulatory considerations
-Taxation is personal
-Trader has total contraol and management rights
-Entitled to all the net profits
Disadvantages:
-Unlimited personal liability for the debts of business - exposed
-No inherent continuity or succession (e.g. if trader dies)
-Often difficult for trader to borrow money
Trust
Created when one person (settlor) transfers legal ownership of property to another
person (trustee) with instructions that the property is to be administered for the benefit of
another (the beneficiary)
Essence of a trust is constant
391
Advantages:
-Not a separate legal entity
-Use of corporate trustee enables business to trade under limited liability (i.e.
beneficiaries not personally liable for debts)
Disadvantages:
-Complex structure that requires considerable work
-Ongoing accounting and taxation complexities
-Trust is taxed if profits generated by business are not distributed
-Trustee has significant responsibilities - can be held accountable by the
beneficiaries
Partnership
Consists of two or more individuals in a business together
e.g. family café business, big legal/accounting firm
Advantages
-Inexpensive to establish and dissolve
-Less regulatory and compliance costs than corporations
-Greater potential to obtain loans
Disadvantages
-Partners at risk of personal liability for the debts of the firm
-Life of a partnership is limited
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Corporation
Most powerful and valuable form of business organisation
e.g. $2 shelf corporations, publicly listed corporations worth trillions
Advantages
-Limited liability of the owners (shareholders)
-Perpetual succession - ownership of public company can change but he
corporation goes on until it is deregistered
-Greater opportunity to raise capital, particularly with public corporation
Disadvantages:
-More closely regulated with much greater disclosure rules
-Greater organisational responsibilities
-Management has significant statutory duties with serious sanction for a failure
to comply
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The two most common kinds of business organisations: partnerships and corporations and agency principles that affect them both. The choices and central feature of each business organisation: Partnership sharing the pain and the gain". Corporation the legal fiction that rules the business world". A person who acts in the name of and on behalf of another. All commercial activity relies on agency - one of the genuine cornerstones of business. Real estate agent acting as a vendor, a person who buys goods or services on. In relation to p"ships: agency principles are so much a part of the way p"ships work that. A sales assistant in mcdonald"s who sells burgers to customers they are regarded as a branch of agency law activity. One difference - each partner is both an agent and a principal of the others. Partners can bind each other and be bound by the actions of their partners.
