Corporation and Business Structure
In this problem, you are working at an accounting firm. Your overall task is to advise clients on the business structure that is most suitable for their plans, a partnership or company. The clients’ circumstances are extremely important considerations.You should also avoid any advice on taxation. You may assume that the clients specifically instruct you not to advise on taxation.
Your clients are three adult members of the same family – two sisters, Greta and Mariana, and one brother, Ted. Greta, Mariana and Ted attend your office and they want advice.
Greta, Mariana and Ted want to open a business which supplies imported Russian food to restaurants. They think this will be a profitable business because there is a lot of demand for Russian caviar and vodka in Melbourne.
Mariana and Ted think that a partnership is a suitable business structure, but Greta thinks that a company is the most suitable business structure. The clients have expressed concern that third parties could take legal action against them or the business structure once the business is operational.
Part A – Written report
You need to write a report to your supervising partner, Rebecca. Rebecca has asked you to provide her with a report which explains:
- the costs, administrative and regulatory burdens of setting up and running partnerships and companies;
- the potential liability to third parties for the two business structures of interest, the partnership and the company, and their participants;
- the importance and differences of the fiduciary duty owed in the operation of the two business structures, the partnership and the company. The clients were confused by the term fiduciary duty and its relevance to the two business structures, so Rebecca wants you to explain the duties of partners in a partnership and the duties of directors in a company, and the difference between them;
- your recommendation on which business structure would best suit the clients planned business. You need to be specific and explain why you recommend a particular business structure. If you choose a company, what type of company is most suitable? If you choose a partnership, what type of partnership is most suitable?
You must address all the above points in your report. Your supervising partner is assumed to be an experienced professional who probably knows the law you are reporting, although she may not know the detail and may not remember case names and section numbers, which you must reference properly. You should use footnotes for referencing so there should be no need for a Reference List or a Bibliography at the end of the assignment. However you must provide sources of any resources you draw on in the answers. See the Moodle resources on Plagiarism. Be sure to access the ALC for assistance with referencing.
You can therefore speak in technical terms to the partner. The purpose of reporting to your partner is not to teach her the law they already know but to convince her that you have done your research properly and that you have weighed up the issues sensibly. The supervising partner needs to be satisfied of this in order to authorise you to advise the client.
You can also assume that the supervising partner is aware of the first meeting and the inquiries from the clients.
Part B – Oral advice to clients
Having reported to the supervising partner, you should assume that you have been authorised to provide an advice as detailed below to the clients who make the final decision, not you. In answering their questions and providing general advice you have to explain the law to them in terms that they can understand and give your reasoning.
One of the challenges of practice is to advise clients about technical matters in words that they can understand, and that is what you will be marked on in this part. It should not be a repeat of the report to the supervising partner because the client cannot understand technical legal terms. Nor should you be reading from a script (like a newsreader) as that would suggest to the client that you do not understand what you are talking about. If you understand what you are advising, you should be able to talk about it to the client without reading from a script. However, you may have some notes to prompt you about what to say. There is nothing wrong with hesitating when you advise, because that is quite natural in real life – it shows that you are thinking.
From your comments at the initial meeting the clients have requested further advice about:
- how partnerships are set up;
- whether written partnership agreements are recommended;
- whether partners must always share equally in profits and losses.
- how partnerships are dissolved, and if there is no partnership agreement the order in which partnership assets are distributed after dissolution. For example, the clients want to know who gets paid first, second, third, etc from the assets after dissolution of partnerships.
You must address all the above points in your video presentation, in which you need to give advice to your fictitious clients – Mariana, Ted and Greta.For the video presentation, you must avoid things like poor audio quality, noise in the background, poor diction that cannot be understood, low volume that is hard to hear, etc. If the video is not up to professional quality the first time you record it, do it again. It’s only 6 minutes. You should also present yourself in a professional manner, neatly dressed, properly groomed and tidy. Remember, this video presentation is a simulation of oral advice to clients!
What you submit
You need to submit one file containing:
- A Title Page – including your name, student number, and word count for Part A;
- Part A – Written report to supervising partner (Word limit: 2000 words, excluding footnotes, 30 marks);
- Part B – Link to a YouTube video containing your advice: (YouTube video maximum: 6 mins, 10 marks). The link must be accessible to the marker. If it does not work, you will get zero for this part.