Hello can someone please help me in this question Nathan and Caroline are ecolog

Question

Hello can someone please help me in this question

Nathan and Caroline are ecologists interested in the field of mushrooms. They have recently discovered a new species of mushroom called the ‘Amanita’ which is deep red in colour with white flecks. The mushroom has been classified as neither a plant, nor an animal, and it contains unique fungal properties that can be used in creams to halt the aging process. Nathan and Caroline intend to develop a business venture where they can farm the ‘Amanita’ and market its anti-aging substance to the cosmetic industry. They have considered various forms of organisations through which to conduct their business, including a partnership, a trust or a company. Taking into consideration the differences between partnerships, trust and companies (including different types of companies), advise Nathan and Caroline as to the form of business organisations that you would recommend they use to conduct the proposed business.

Refer to the relevant sections of the Corporations Act 2001 (Cth) and cases where possible. You are required to briefly discuss the law and apply the law to the facts. It is recommended that your answer does not exceed 18-22 lines and a time allocation of 20 minutes.

Explanation / Answer

To answer this, it is extremely important to understand the difference between Partnership, Company and trust in terms of ease of registration of business, liabilities, compliance, articles and memorandum of association, legal implications, bankruptcy laws, eligibility criteria to raise the working capital and trading the stocks on stock exchanges.

Firstly, lets see what Partnership, Trust and a Company mean :

A partnership means that a number of people (up to 20) are responsible for the running of the business. Decision making and financial investment are often shared, lessening some of the workload and risk, but compromises have to be made to keep all partners happy.

Key points

Pros

Cons

In Company, the business structure is a separate legal entity. This means it has its own legal rights, and personal liability is limited.

Key points

Pros

Cons

A trust is an organisation run by a trustee to benefit listed beneficiaries. The trustee can be either an individual or a company, and is responsible for any debts and liabilities.

Key points

Pros

Cons

Source : https://www.commbank.com.au/guidance/business/choosing-the-right-business-structure-201705.html

But in Nathan and Caroline's case, assuming that they are going to start a new business with limited capital and possibly funded by bank as a business loan, the best option is LLP ( Limited Liability Partnership )

A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership.

Pros :

Cons :

Source : https://www.simpleformations.com/llp-benefits-and-disadvantages.htm

LLP, gives Nathan and Caroline more time to invest on their product research and marketing as rest of the legal compliances are at minimum.

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