LAW513 Business Structures in Australia: Corporate Law Assessment 1 Answer

PART A

BUSINESS STRUCTURES

The common used BS- business structures in Australia along with their merits and demerits are underpinned below-

SOLE TRADER

STS- Sole Trader structure is majorly suitable for the SS-small-scale business operations, especially those which are based upon the owner's talents. In addition to this, such business often trades under its name and is held liable for taxes in regards to business income being included in their API-annual Personal Income TR-Tax Return as well as taxed at MR-marginal rates (Watson,2017).

MERITS

The owner possesses a direct control over his business and gets entitled to aggregate success

Lower costs & minimal legal formalities needed for starting such business

Once this business grows to change of such structure can be done hassle-free

Such business ensures greater privacy

DEMERITS 

Due to sole traders, the owner has to take full responsibility for liabilities occurring out of this business.

It might extend to owner’s PA-personal assets for paying the debts of business

Sole Trader is held payable on taxes being made on all revenues or profits.

PARTNERSHIP

With a Partnership, new business comes into effect by two or more partners or individuals who have this authority of being the owners or even the principles of such business. Additionally, the partners tend to share CPL-costs, profits & losses concerning such business, although, the partnership to needs or requires its TFN-Tax file number. Moreover, developing a PA-Partnership Agreement gets mostly suggested or recommended for setting out T&C-terms and conditions of that partnership along with the duties of every partner of business. In addition to this, partnership name (if being other than own name of partner's} shall be registered under the BNA- Business Name Act (Yasin, 2017).

MERITS

Such business structure permits or fosters a combination of various or different skills

Some of the tax gains or benefits might be receive 

Normally, a partnership is eventually dissolved when the death of 1 of existing partners arises.  

TI- taxable income or even the loss of such partnership gets majorly distributed, according to the PA-partnership agreement.  Although, if no such agreement takes place or exist then it will be equally distributed or divided between the parties.

DEMERITS

The partner’s liability is unfortunately unlimited, & it extends to respective private properties as well as partnership assets.

Concerning taxes or taxation, the partnership is needed or required for lodging an ITR-Income Tax Return.

Every partner is held responsible in regards to other partner’s S-share of its business liability/liabilities.

COMPANY

There exist major two types of companies which are public companies as well as private companies. Moreover, private companies are normally the most famous or popular. In addition to this, the Public Company might be listed on SE-Stock Exchange or even as the UPC-unlisted Public Company (unlisted or not gets listed on SE-Stock Exchange.) Moreover, the shareholders own their company while the directors get appointed majorly for running the business. Moreover, like a Partnership, such Companies should also have their TFN- Tax file number (Solaiman, 2017).  

MERITS

The liabilities are normally finite or limited to assets of company only and shall not be extended to an asset of owner (along with some exceptions)

All the company's profits get taxed at a single tax rate.

DEMERITS

A more confusing /complicated as well as an expensive structure for setting up exits because of compliance costs

There exists additional legal as well as FRO-financial reporting obligations

Such business structure isn’t suitable in regards to the business start-ups

TRUST {DISCRETIONARY AND UNIT}

This is where one’s business gets transferred towards a 3^rd party who possess a legal control for running the business & the one who normally distributes I-income &/or capital among or between the RB-relevant Beneficiaries. There are mainly two types of Trusts which comprise discretionary & UT- Unit Trusts. Likewise a particular company & partnership, Trust requires to have its TFN-Tax file number. On the other side, it’s also suggested or recommended to have TD-Trust Deed that sets Trust powers or powers of such Trust, & then formalizes its A- administration.

MERITS

It might be used for holding property (or capital) for B-Beneficiaries

There exists flexibility concerning an income distribution (DT-Discretionary Trust).

DT or discretionary trust normally provides or offers a big level of AP-asset protection.

DEMERITS

Difficult or challenging to dismantle

Required for lodging an STR-separate Tax Return for such Trust

Beneficiaries usually pay PIT-Personal Income Tax in regards to their IT-income distributions from such Trust.  CS-Company structure or private limited structure of company is finest for the Australian businesses (Moll, 2017).

Explanation- The above-mentioned table reveals that the private limited CS-Company structure is finest for Australian businesses. Moreover, the point to be noted is that the company it the most preferred structure in Australia (Moll, 2017).

Now, the reasons why the Company has eventually become the PS-preferred structure for operating their businesses in Australia are underpinned below-

Protection over Personal Assets

Company owners, or let’s say the shareholders possess LL-limited liability which means they couldn’t lose their PA-personal assets at the time when the firm falls highly into DB- a debt of bankruptcy in Australia. Incorporating one’s business is a smart way of protecting personal assets. A corporation or company can chiefly own property, carry-out business, and IL-incur liabilities (Moll, 2017).

Some business elements can be amended or changed for instance- the business name, BN-brand name, L-logo as well as BBI- business branding image at any point in time although, it can't be denied that the costs & threat or risks of doing same might be there in Australia.

Regardless of whether selecting to become a sole trader, P-Partnership, T-Trust or even the private Limited Company in Australia, it will require-

RBN-Registered business name

ABN- Australian Business Number

TFN or Tax File Number)

& likely to get registered for GST too. 

Therefore, it can be said that while incorporating as C-Company, one will eventually be the shareholder, or let's say SS-sole shareholder or even may have MS- multiple shareholders in one's business (Moll, 2017).

PART B

CONNECTION BETWEEN AS-ACCOUNTING STANDARDS & CA-CORPORATION ACT

AS-Accounting standards are globally or let's say internationally recognized/identified & usually followed by every /most of the countries for with the major purpose of accounting as well as reporting. Although, these aren't legally bound for following or adherence unless gets usually adopted by those countries LL-local laws as well as regulations. Hence, if the country wishes or wills for adopting S-standards then it will be required or needed to involve an adoption via the legislation like the CA- or Corporations Act. In addition to this, the AS- accounting standards ensure FS- financial statements from various or multiple firms/companies are easily comparable. Moreover, as every entity adheres to the same current rules, AS-accounting standards eventually make such FS- financial statements more credible & permits for more ED-economic decisions contingent upon an accurate as well as consistent information or data. Similarly, the corporation act chiefly deals with existing firms or companies along with other entities like- partnerships.  

The AASB or Australian Accounting Standards Board with the assistance of the LS-legislative instrument creates the AS- accounting standards for chief purposes of the CA- corporation Act. Additionally, the standards shouldn’t be at odds with or inconsistent with such Act or even the regulations (Luftman, et al. 2017).

An AS-accounting standard usually applies towards-

1. The periods that end after the COS- commencement of the standard; or
2. The periods that end with or beginning, on or afterward the later date elucidated in the standard.
3. The company or DE-disclosing entity or even the RS-registered scheme might be elected for applying such an AS-accounting standard for early unless such standard states otherwise. Additionally, the election should be formed in writing majorly by the directors. 
4. Entities needed by the CA- Corporations Act 2001 for preparing the FR- financial reports.
5.  Governments in preparing such FS-financial statements for the aggregate of government & the GCS-General Government Sector.
6.  Entities in public or private, for-profit or let’s say NFP- not-for-profit sectors which are majorly the RE-reporting entities or one which prepares a  GP- general-purpose FS-financial statements.

Moreover, under the provision of ACA-Australian Corporations Act 2001, numerous entities are needed for applying AAS- Australian Accounting Standards while preparing their financial statements.  On the other side, some public sectors being entitled are highly required to apply AAS-Australian Accounting Standards under C-Commonwealth, S-state, or even the TL-territory legislation by particular instructions for preparers or with the aim of reporting frameworks which majorly sets guidelines. Therefore, this way the connection is visible between both (Grant, 2016).

ROLE OF ASIC AS WELL AS AASB IN RELATION WITH THE RULES OR REGULATIONS OF COMPANIES OPERATING IN AUSTRALIA-

The ASIC-Australian Securities and Investments Commission can be defined as an independent body of government or government body that majorly acts as ACR-Australia's corporate regulator. In addition to this, ASIC's role and responsibility are primarily to enforce as well as regulate particular or existing company along with its financial services legal laws with a view to protect Australian consumers/buyers, investors as well as the creditors.  In addition to this, as said earlier. Moreover, the Australian Securities & Investments Commission-{ASIC} is held accountable for the enforcement in regards to the accounting standards which is issued by- AASB under a CA-Corporations Act of 2001. On the other hand, the accounting standard in Australia which is AASB is majorly an agency of the government of Australian and these standards or AASB standards are commonly called AAS-Australian Accounting Standards that comprise or include Australian equivalents to IFRS- International Financial Reporting Standards. Therefore, it can be said that ASIC Australia firmly acts as an ACR-Australia's corporate regulator. Moreover, the company's existing and operating in Australia are to be regulated by ASIC and AASB respectively. Additionally, ASIC has a wider range of authorities or powers & functions or operates as a major regulator as well as an enforcer. The point to be noted is that ASIC is also the PR-principal registry & source of information for the matters or company or company matters. From a company's registration facet, primarily the companies are needed to chiefly sign up for the connect account of ASIC.  Moreover, the companies must have already found or searched about ASIC and intellectual property Australia databases for ensuring that such business name isn't previously registered or let’s say trademarked. In addition to this, the registration fee for ASIC is estimated at either $36 yearly or around $84 for 3 {three years]. Moreover, when the company's application gets approved the company will be provided ACN or Australian Company Number. Although that company might have registered its business name with ASIC, that doesn't necessarily mean that its exclusive ownership can be there. Therefore, it might be used as TA- trading as name or PLN-private limited name or even trademarked as one brand name. Surely, the ASIC is one of Australia's integrated corporate, M- markets, FS- financial services as well as CCR- consumer credit regulator. Moreover, the AS-Accounting standards make sure that the FS- financial statements from various or multiple companies are easily comparable. As said earlier the Companies operating in this country or Australia are firmly required to draw/prepare & lodge FR-financial reports with this-ASIC, normally at financial year ending or end of accounting year. Moreover, the annual financial reports shall need to be A-audited. Although, in some circumstances, companies might be exempted from same. Hence, it can be said that with the provision of both ASIC along with AASB the companies are well controlled such that no issues or fraud or business issues occur for the companies of Australia (Solaiman, 2017). 

CONCLUSION

It can be concluded that the various business structures such as partnership, company, trust, and sole trader are commonly and widely used in Australia. In addition to this, the company as a business structure is mostly preferred for operating business in this country. Moreover, the connection between ASIC & AASB in regards to the companies regulation was acknowledged.