Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia This is the prescribed textbook for your course. Available NOW at your campus bookstore!

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Business organisations Chapter 4

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-2 Definitions Sole trader - The business is owned and operated by one person with all profits or losses attributed to the owner. Partnership - A relationship between two to twenty persons who carry on business in common with a view to a profit. Joint venture - Usually a one-off enterprise with participants receiving profits separately, based on contractual agreement. Unincorporated association - A body of two or more persons who are organised for a particular purpose, which may or may not include the purpose of carrying on a business with a view to a profit.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-3 Definitions Incorporated association – A body of two or more persons who are organised for a particular purpose, which may not include the purpose of carrying on a business with a view to a profit. Company – An incorporated body created by a process called “incorporation”, regarded by law as a separate legal entity. Trust – A relationship recognised by the law of equity, where a trustee holds property for a beneficiary or beneficiaries.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-4 Formation Sole trader - Simple, with little documentation Partnership - Partnership agreement recommended; easy to form Company - Relatively high establishment and compliance costs Trusts - Relatively high establishment costs

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-5 Control Sole trader – Makes all the decisions Unincorporated Association – Control rests with committee of associates

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-6 Management Sole trader - In hands of individual; difficult to achieve absences from business Partnership - Leave other partner in charge when absences required Association - In hands of committee of the association Company - Undertaken by Board of Directors Trusts - Undertaken by trustee

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-7 Flexibility Sole trader - Nature of business can be altered Partnership - Nature of business can be altered with agreement of all partners Company - Nature of business can be altered but may have tax consequences Trusts - Nature of business is restricted by trust instrument

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-8 Expertise Sole trader – Limited to one person’s knowledge, unless hire additional personnel Partnership – Several areas of expertise available from individual partners

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-9 Taxation Sole Trader - Dependent on level of profits. Large profits will result in high taxation, as income only attributable to one person. Partnership - Profits of partnership are shared as agreed. Taxed in the hands of the partners. Joint venture - Income received separately Company - Special company tax rates. Can be distributed to access tax advantages. Trusts - Income taxed in hands of individual beneficiaries. Can be distributed to access tax advantages. (Discretionary trusts allow changing distributions of income and capital between beneficiaries in different years.)

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-10 Liability LIMITEDUNLIMITED limit no limit to the liability of the owners for the business debts

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-11 Liability Sole Trader - Unlimited liability. Personal assets available for business debts. Partnership - Unlimited liability. Personal assets of partners available for business debts. Joint venture - Unlimited liability for individuals who may be sued collectively or individually for the debts of the joint venture. No liability for actions of other participants. Unincorporated Associations - Limited to the amount of a member’s subscription. Liability for agents and breach of warranty of authority may fall on members of committee. Incorporated - Limited to payment of outstanding fees of members. Companies - Limited by shares of guarantees. Trusts - Limited, if trustee is a company, to the assets of the company. If not a company, trustee personally liable for tortious and contractual liabilities.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-12 Limitations of business life Sole trader - For life of owner, without interruption. Partnership - Death, bankruptcy or withdrawal of a partner will end partnership. Association - Perpetual succession. Company - Separate entity from owners; perpetual succession. Trust - Terminate if trust property rests in person ultimately entitled to it. If trust property has been transferred to beneficiaries, continued administration of trust would be illegal.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-13 Capital Sole trader - Limited to ability of one person to gain finance. Partnership - Limited to ability of partners to individually gain finance. Private company - Limited to ability of directors to gain finance. Public company - Capital raised by way of a share of debenture issue.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-14 Types of companies Companies limited by shares - Public companies - Proprietory companies (1-50 members) (Shareholders will be liable for unpaid amount on their shares.) Companies limited by guarantee Unlimited liability companies No liability companies (mining companies) Small Large

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-15 Directors Elected by shareholders Natural person Over eighteen years of age Power to manage company assets Upper age limit of 72yrs for public companies

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-16 Duties of directors Act in good faith for the interests of the company Exercise powers for a proper purpose Use discretions properly Avoid a conflict of interest Act honestly Not to misuse company information Not to obtain a gain by using their position Use care and diligence

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-17 Liability of directors Personal liability for: making false and misleading statements or omissions in prospectus failure to appoint a company secretary incurring debts when the company had little prospect of repaying the debts.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-18 Rights of shareholders Notice of meetings Attend meetings Entitled to dividends Entitled to financial information Sue on behalf of the company

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-19 Criminal offences for directors in breach of their duties For: Recklessly or intentionally failing to act in good faith to protect the interests of the company Dishonestly using the position of director within the company, either intentionally or recklessly, to gain an advantage Dishonestly using company information, either intentionally or recklessly, to gain an advantage.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-20 Five elements constituting a trust Settlor - Person responsible for creating the trust Trustee - Person to whom the trust property is given Beneficiary - Person who will benefit from the trust Trust property - Property that is the subject of the trust Trust instrument - Document that details the terms of the trust

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-21 Winding up a company Reasons: The company is no longer carrying on a business. The company fails to commence business within one year of incorporation. The company has outstanding debts of at least $ Members have passed a special resolution to wind the company up. Membership of the company falls below a certain number (initiated by a director, a member, or a liquidator of a company).

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-22 Trusts Express (Direct or declared trusts) Intentional act of a settlor, created by words, written or spoken identifying the trust property indicating the nature and purpose of trust identifying beneficiaries (can be discretionary where trustee will choose the amount to be distributed to beneficiary in Discretionary Trust) Non-Express No intentional action by the settlor. Implied trusts (Presumptive trusts) - law draws inference from the circumstances that a trust was intended. Resulting trusts - where property returns to the creator of the trust. Constructive Trusts - Results from the operation of law (of equity)

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-23 Classification of trusts Private - For the benefit of private individuals. Public - For the benefit of some public purpose. Trading - The property of the trust is used in the running of a business. Unit - The beneficiaries own units of the trust.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-24 Duties of trustee Maintain fiduciary relationship Familiarising themselves with the trust property Obeying instructions Not delegating duties Not deriving profit from their position Keeping proper accounts Maintaining impartiality Exercising reasonable skill and care Paying and transferring property only to those entitled

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-25 Rights of trustee Reimbursement for all expenses incurred Indemnification against all costs Seek contribution for losses On completion of administration of trust, entitled to receive a discharge

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-26 Liability of trustee Personally liable for tortious and contractual liabilities

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-27 Business names legislation Business name must be registered unless all names of operators or traders included in business name, i.e. the full names of the operators or the surname together with: –the Christian name or names –the initial(s) of Christian name or names –a combination of Christian name and initials –the Christian name or names (or initials) by which individuals are commonly known.

Copyright  2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright © 2000 McGraw-Hill Australia 4-28 Purpose of registering business name Public knows who they are dealing with (Public Registry) Impose restrictions on names registered if: - identical to or closely resemble name already registered - considered undesirable - suggest a connection with the government or banks - likely to be confused with names of companies or incorporated associations - ensure “crown” or “royal” not used To protect the goodwill of the business