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Types of company in Australia
Sole trader; It is the simplest type of association. Sole trader ship do not require certain formalities only one person can owns the ownership and employ other people in the organisation. Business assets and liabilities have no separate existence from the owner. In Sole trader ship the owner do not pay any corporate taxes, but rather the proprietor pay personal income taxes. In sole trader ship the owner controls the whole business and do not shared the profits with anyone. the only legal requirement for this kind of business is getting Australian business number(ABN) and in some cases registration for material and service tax(GST).If the owner do not want to carry out the business on his owns name the person will only be required to record the name in valid (state or territory) business Act. The owner of the business is responsible for the company losses if the company face any difficulties the owner personal property will be sold to pay all the loans. There is also no legal process which allows another to come into the possessions. The passing away of the proprietor may bring the business to an end (wooddward et al,2005:18).
Partnership; “The relation which exists between two companies or organisations which run the business in common with view of making income. According to partnership Act 1958, partnership is the collection of individual trader who combines for making income point.
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Categorization of companies according to legal responsibility of members.
Limited by shares; The general form of business wether public or private, in case if the company does not have enough property to meet all the loans each member will have to pay according to the amount contributed in shares. The restriction on individual legal responsibility is the major motivation for the kind of business. This benefit is mostly invalid for undersized companies unless the company has considerable property. The directors will not be legally responsible for the default in payments by the company to unsecured creditor; they will only be responsible for their individual aptitude as grantors (wooddward et al,2005:26).
Limited by guarantee; In this type of organisation the partner will only contribute if the business faces any difficulties. The difference between the two is timing of money payment. This type of company is suitable for money-making enterprises. All the limited by guarantee organisation are not meant for profit organisation usually raise funds for loans; and social activities etc, are formed for help purpose (wooddward et al,2005:27).
No liability; In this type of organisation the members are not legally responsible for instalment on partially paid shares. The members are allowed to choose that whether they wants to pay instalment or give up the shares. The no liability company have to be a mining company, not all the mining companies are not any liability company. In some cases it may be easy for a company to operate as limited by shares (wooddward et al,2005:27-28).
Trust; One of the simplest forms of company a trust exists when one person or party (trustee) invest on behalf of the other person or party (beneficiary). Trusts are of many types but the mainly common is the unit trust, possession is separated in into packages. In company they are known as shares and in trusts they are known as units. Trust not separate lawful body the trustee and beneficiary are liable not the trust. Trust can’t sue are be sued as separate legal body. Taxes can’t be imposed on the trust as separate body, taxes are paid by beneficiary or if the wealth is not distributed in a year than the trustee is personally responsible for all legal responsibilities. In trust there is no limitation on the number of beneficiary and trust is not affected by death of beneficiary. According to general law rule ‘’the rule against the perpetuities’’ the minimum life of the nominated person more than 20 year, in some states it 80 years (wooddward et al ,2005:20-21).
Unincorporated not-for-profit association; This type of organisation in which the distribution of the profit is prohibited. The formation of such organisation is not meant for profit. The organisation is not regarded as legal entity for liabilities (wooddward et al,2005:21).
Unincorporated joint venture; There is clear difference between unincorporated joint venture and partnership. If a group of people form a single project on continuing basis this would be consider as unincorporated joint venture. Common example is when two companies agree on digging a mine and divide the ore on extraction. (wooddward et al ,2005:21-22)
Companies’ registration; The process of registration of company in Australia is much more easy. ASIC is the authorized body for the registration of the companies. It is not necessary for company for to have legislation for the registration. On after registration the ASIC gives a company number called Australian company number. This number is the main proof of company’s registration (burnett,2001;54-54).
Company’s names; The name information is kept in national business registration register, name for company can be reserved the commission decide in two months if the name is acceptable. The kind of company must appear at the end of the name i.e LTD,NL etc. If the corporation wants to change the name of the business it must approved application forms the form with “Australian Company Number” ,name change does not forms a new corporation( burnett,2001;55).
Australian company’s number; Besides the company is being registered the companies are given special number called “Australian Company Number” or “ACN”, A company is required to quote its ACN in seal, every public document, cheque etc signed on behalf of company. In July 2000 when the goods and servies Tax was imposed the companies were given the permission of using “ABN” instead of “ACN” (burnett,2001: 59).
Australian registered body Number; ARBN is given to foreign companies any business register under Pt 5B.2 of corporation law. ARBN operates in similar way as ACN with a very few exception. company registered in one pace can transfer to a new domicile in one the participating jurisdiction. Business are allowed to transfer from one place to another (burnett,2001;60).
Effects of registration
When a company registers it exist as a separate “Body Corporation”, and is regarded as a “person” for official purposes. Companies gain their powers through the Corporation Act: s 124. Companies are given powers with some limitation.
When a company come into existence it has several consequences. As a separate legal “person” a company can:
• It can sue or be sued by its name.
• To continue to exist regardless of changes in membership. A company has to maintain its registration which is kept up with ASIC.
• Acquire, hold and deposit of assets. Members may have share in the company but can not give themselves the interest of the assets of the company and neither can fraudulently use company’s property for their own benefits this also apply for the sole member or the sole director of the company.
• Can not take contracts and gain liabilities in their name.
A company is recognized as a separate body its members can enjoy some degree of legal responsibility (wooddward et al ,2005;50)
Corporate veil; It exists when the company is registered and separates the company from the people who created it and from the people who become its members. People with in a company take advantage of the veil incorporation because it is a personal legal responsibility in case of liquidation of company. An example of such is the “phoenix companies” to avoid the creditors. Phoenix company is not a legal term its used to describe the company failed its creditors but soon after rose like a Phoenix from the ashes(wooddward et al,2005:52)
Lifting the corporate veil; In most of the cases outsider tries to pierce the veil. The veil can be lifted by any one of the following
By statutory provision
Or by general law principle
“statute that provide for lifting the veil include taxation, occupational,health and safty.environmental protection etc.” (wooddward et al,2005:53)
Insolvent trading; Such situatation in which the company suspicious of not able to pay its loans and the company continues to trade ,in this case the director would be legally responsible for under ss 588G-588M , and under ss 588V-588X the property of the holding will be held responsible wooddward et al,2005:53).
Un commercial transaction; The transaction which are made before the company liquidation the court has wide powers to order compensation under ss 588FB-588FF (wooddward et al,2005:53).
Unreasonable director-related transactions; The transfer of company holding or deal in favour of director where the company position would not entered into the transaction comes under ss 588FDA Amendment Act 2003(wooddward et al,2005:53).
Employee entitlements; Dealing with bad intention against other employees is prohibited and the offender may be required to pay damage comes under 5.8A Amendment Act 2000 (Wooddward, et al,2005:54).
Company officer charges; director are granted over the company holding can not enforce charge within sex month unless the court ordered 267 (wooddward et al,2005:54).
Financial assistance; If accompany provide financial assistance for purchase of shares its the company person who involved in contract is legally responsible for breach not the company:s260D
1. APLA.com, Corporation law, Available http://www.apla.com.au/law/corporation_law.php, [accessed on 5th July 2008].
2.woodward.S,Bird.H,Sievers.S;2005,’Corporation law in principal’7th Edition,Thomson lawbook Co,p;18 _53.
3.Burnett.B;2001,’AUTRALIAN CORPORATIONS LAW’,CCH,p:54_60,