Steve And Wonder Case Study

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The three main business organisation structures considered by Steve and Wonder are partnerships, trusts and companies. In order to understand the key differences between the three and to put forward a recommendation for the most apt structure, it is essential to grasp the basic definition of each . A partnership is an association of two or more people who typically know and trust each other and therefore come together to set up and carry on a business. The partners have an equal control over the company’s affairs and typically contribute an equal capital amount. Incomes and losses are also equally shared . A trust is an obligation given to an appointed person, the trustee, to hold the assets and property of the business on behalf of the others who are termed as beneficiaries. The trustee could be a company, sole trader, partnership of individual and has the discretion over running and managing the trust including matters such as investments, debt, and income generation. The beneficiaries are all those who receive the income or incur expenses. A limited liability company is a complex business structure whereby it is a separate legal identity, separate from the partners. The company is owned by the shareholders and managed by the directors. The recommendation for Steve and Wonder as the best-fit organizational plan for their business is to set up a limited liability company. The case for this recommendation is built through the factors discussed below. The first factor is that of risk. A company is a separate legal entity. This means that it has its own debts. In case of a membership, there is no limit to the liability of the partners and they may have to be personally responsible to pay off any outstanding debt towards the busines... ... middle of paper ... ...s committed by Wonder arises a conflict of interest and a breach of the contract made with the company. Wonder failed to meet the responsibilities when he did not inform Steve about his dealings. A director must not let his personal interests and company duties and responsibilities conflict. This is a fundamental rule of Equity (Phipps-V-Boardman (1967)2AC123). A director may not apply company property either for his personal interests or for the benefit of any other person without the authority of the company. As Wonder breached the contract and did not fulfil the duties and responsibilities as a Director of the company, Steve can succeed under the corporations Act 2001 (cth) and the case law in having the contract relating to the bank loan (mortgage) declared as invalid. Steve can take legal actions against Wonder as he was liable for the breach of conract.

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