BTC2000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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