BSB111 Lecture Notes - Lecture 7: Apparent Authority, Settlor, Business Matters
Lectorial 7 – Business Structures and the Law of Agency
Selecting a Business Structure
- When starting a new business one of the most important legal questions a person will have
to answer for themselves is which business structure they will adopt. The most common
types of business structure are:
o Sole trader
o Partnership
o Company
o Trust
- The pesos hoie of usiess stutue ill hae ipotat oseuees i tes of:
o The ease and cost of setting up the business
o Their legal and financial liability
o The way they pay tax
o Their ability to raise finance
o Their ongoing regulatory obligations
Sole Trader
- A person is a sole trader if they directly own and operate the business by themselves
- A sole trader:
o May engage employees but they are the sole owner of the business
o Has sole responsibility for raising the funds to start the business
o Has sold control over the operation of the business
o Is entitled to all of the profits of the business
- The sole trader has unlimited personal liability for the debts and other legal obligations of
the business
- There are no formal legal requirements that need to be satisfied to establish this type of
business structure
- Advantages
o Very little formalities to comply with
o Full ownership means the owner makes all decisions and gets all profits
- Disadvantages
o Personally liable for business debts (unlimited liability)
o Limited sources of capital
o One person may not have all the skills needed to be successful
Partnership
- A person is a partner in a partnership if they and at least one other person directly own and
operate a business together
- Pates geeall hae utual age;
o Each partner is both the principle and the agent of the other partners. This means
that each partner is liable for the actions, contracts and debts of the other partners
- A partnership is not a separate legal entity. Each partner has unlimited personal liability for
the debts of the partnership – mutual liability
- There are no formal steps
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Document Summary
Lectorial 7 business structures and the law of agency. When starting a new business one of the most important legal questions a person will have to answer for themselves is which business structure they will adopt. The most common types of business structure are: sole trader, partnership, company, trust. A person is a sole trader if they directly own and operate the business by themselves. A sole trader: may engage employees but they are the sole owner of the business, has sole responsibility for raising the funds to start the business, has sold control over the operation of the business. Is entitled to all of the profits of the business. The sole trader has unlimited personal liability for the debts and other legal obligations of the business. There are no formal legal requirements that need to be satisfied to establish this type of business structure.
