BTC2000

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17 Terms

1
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What is a Sole trader?

  • Owned by one person

  • Simple and inexpensive to establish

  • No legal distinction between owner and the business

  • Owner has unlimited liability for the business' debts

2
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What is a partnership?

  • Two or more people carrying on a business in common with a view to profit

  • Generally between 2 and 20 people

  • Activities must be commercial and ongoing in nature

  • There are mutual, shared or reciprocated rights and obligations

  • Partners have fiduciary (common law) duties towards the partnership

3
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What is a joint ventures?

  • People coming together to seek an individual profit

  • Do not share profit or losses

  • Are severally liable only

Agreement regulates the joint venture relationship:

  • Assets owned as tenants-in-common

  • Co-ventures are not agents for others

  • Several, but not joint, obligations

  • Venturers share in rights to the product, but not in profit

4
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What is a company?

  • Separate legal entity created by registration with the Australian securities and investments commission (ASIC)

  • Has most of the powers of a natural person

  • Limited liability to owners

5
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What is a trust?

  • A legal obligation, or equitable device imposed on a person to hold property for the benefit of others

  • A relationship between parties and not a separate legal entity

  • Treated a taxpayer entities

  • Cannot exists beyond 80 years

  • Trust no longer exists after all requirements have been carried out

  • Created via a trust deed = must be in writing

6
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What is a settlor?

  • The party who creates the trust via a trust deed and places the trust property into the trust

  • Might be an individual in their capacity as a private person

  • Once the trust is established, the settlor's role ends

7
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What is a Trustee?

  • The party under the trust deed who holds the trust property and deals with in on behalf of the beneficiaries

  • Must follow the instructions in the deed

  • Might be a natural person/s or a body corporate

  • Corporate trustee = company that is under the trust

  • The legal owner of the trust property = cannot use as if it were their own

  • Not a separate legal entity

  • Obligations set out in the trust deed as well as Trustee Act 1958 (vic)

  • Responsible for managing the Trust's tax affairs

  • Personally liable for the debts of the trust

8
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What is a beneficiary?

  • The person/s on whose behalf and for whose benefit, the trust property is held

  • Beneficial interest in the trust property

  • Entitlement to trust income or capital, or they may acquire an entitlement because the trustee exercises a discretion to pay them income

9
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Defined fixed trust

  • Fixed amount each beneficiary will receive

  • Beneficiary knows what they will receive

  • Unit trust is a type of fixed trust

  • The right to sue if the trustee for any loss for breaching their duties or the loss of trust property

10
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Define discretionary trust

  • Gives the trustee discretion as to how the trust is distributed to the beneficiaries

  • May not receive anything under the trust as they have a mere expectancy to the property

  • Can be used for asset-protection, income streaming for tax purposes, and permit superannuants to manage the amount which they contribute

11
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What is a trading trust?

  • A trust which operates a business

  • Carried on a business on behalf of the beneficiaries

  • Usually a proprietary limited company with a very small amount of capital

12
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Define Limited partnership

  • Consists of a limited partnership and general partner

  • Limited partnership has no control in the management and operation of the business = contribute capital to the firm and share profit = not liable for partnership debts or liabilities

  • General partner manages venture and has unlimited liability

  • Limited partner may be individuals, partnerships or companies

13
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What is the duties of a trustee?

  • Being familiar with the terms of the trust

  • Preserving the trust property and deal with it according to the trust deed

  • Following the terms of the trust deed

  • Acting impartially

  • Acting only for the beneficiaries' interests

  • Not making any personal profit

  • Refrain from activities that will conflict their duties

14
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State the rights of a trustee

  • Obtaining indemnity and reimbursement from the trust for all expenses incurred in connection with the trust

  • Having trust accounts examined or audited by a public accountant

  • Obtaining personal protection from litigation for a breach of their duties when acting in accordance with a court's direction

15
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What is the liability of a trustee?

  • Usually fall on the trustee personally as a trust is not a separate legal entity

  • Can escape liability by asking for compensation from the trust property for the liabilities incurred

  • May agree in contract that trustee shall not be liable

16
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Explain the traits of a company.

  • Can be involved in non-trading and non-profit activities

  • Must be registered under Corporation Act 2001 (Cth) before operation begins

  • Companies are registered and regulated by ASIC

17
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