Structure To Carry Out Business Operations â€Myassignmenthelp.Com

Question: Discuss About The Structure To Carry Out Business Operations? Answer: Introduction Just like sole proprietorship and incorporated business organizations, a partnership is a business structure used to carry out business operations. The meaning of partnership in Australia is the same across all states and territories in spite of different legislations governing it. Every definition provided by such legislation provides the same meaning in relation to the existence of a partnership. Firstly a partnership comes to an existence through a valid agreement between two or more partners. The agreement must satisfy all the essential elements of a contract. The agreement must be for the purpose of carrying on a business activity comprising of various business transaction. In case an agreement is formed between two or more parties to carry out a particular transaction it results in joint venture and not a partnership. The partnership provides mutual rights to all partners in the business as per the terms of the agreement. The partners are in accordance to the law of agency boun d to each other actions and each partner is regarded as an agent of the business. Therefore if one partner gets into a contract on behalf of the business the contract would be binding on all the partners of the business. A partnership has to be initiated for the purpose of making a profit. Non profit businesses like sporting clubs and charities are not considered as partnership and neither governed by the Partnership Act (Callison Sullivan, 2012). The commonwealth legislation which governs partnership in Australia is the Partnership Act 1963. In order to find out the position of mary, violet, sonny and rose it has to be firstly determined that whether a relationship of partnership exists between them on not. In case they are partners they would be liable to the third party for the actions of each other. Whether a partnership between the parties exists or not would be determined through the application of the elements of partnership in relation to the scenario. Existence of a partnership This section of the paper determines whether a relationship of partnership is present or not between Mary, Violet, Sonny and Rose through applying case laws and legislation to the facts of the case. As provided by Morse (2010) a partnership is a association among individuals indulging in business activities for the general purpose of making profit. It requires an agreement between two or more parties which is binding legally and contractual in nature. In the case of Green v Beesley (1835) 2 Bing N C 108 at 112 Tindal CJ defined partnerships as mutual participation however no legal entity is created by a partnership. In the case of Smith v Anderson (1880) 15 Ch D 247 at 273 it was provided by James LJ a partnership is a relationship between fixed person who are bound to each other with respect to an agreement which is carried out for a mutual objective, both in times of profit and loss. However a limited number of people are only allowed to form a partnership as provided by the Corpor ation Act 2001. The law of partnership is taken from both common law and statutory provisions. In the case of Lang v James Morrison Co Ltd (1911) 13 CLR 1 at 11 it was ruled by the court that partners while performing their duties in relation to the course of business acts as the agents of each other. The Partnership Act 1963 (PA) through section 6 provides the meaning of partnership. The section states that relationship between people having a common aim of profit making is a partnership which also includes an incorporated partnership. An external partnership is also included in the partnership as per section 6. Mary and Rose It has been provided by the scenario that Rose and Mary run a business known as the Busy Bee Florist Shop as partners. This means that they are bond to each others action which is committed during the course of business. There has been unseasonal weather and a drought which have resulted in losses for the business. They have also taken loan from friendly bank which is according to the provisions of partnership binding on each other. The profits and losses also have to shared by them equally as a contrary agreement has not been provided. Rose has approached one of her friends Violate to obtain a loan by providing her a share of profit. She has the authority to enter into contracts on behalf of the partnership therefore the contract is valid. Latter Mary had approached Sonny who is also the employee of the partnership for a lone in return of profit sharing in the business. After obtaining the loan both Mary and Rose go for a vacation even when the business was declining. They had also informed the bank from which they have taken loan that they have incorporated Sonny and Violet as partners. The question which has to be determined is that whether Violate and Sonny are the partners of the firm and thereby bond to the bank loan. The legal position of violet The agreement which Violet has entered upon with Rose in relation to providing the loan of $20000 to the business had the following terms. Firstly violet would have the right to share 20% profit and losses in relation to the business. Secondly violet would have the right to examine the books of account of the partnership. Thirdly, she would be entitled to be provided with a business statement quarterly. Finally, the money provided by her has to be considered by a mere loan and she is not to be considered as a partner of the business. The document of loan was executed before the money had been advanced by Violet. Section 7 of the PA provides provisions for the purpose of determining whether a relationship of partnership exists between the parties or not. 7(1) states that for the purpose of determining a relationship of partnership exists or not is based in the application of subsection 2-4 of this section. In the case of Canny Gabriel Castle Advertising Pty Ltd Anor v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 the defendants Volumes sales had indulged into an agreement to finance Fourth Media Management Pty Ltd. The agreement specified that the business was a joint venture and the money is provided only as a loan to the business. However the judges in this case ruled that the contract is an implied partnership and not a joint venture or a loan agreement. This was because the view of both the parties to the contract was to make profit. The profit which was made were to be shared equally. The parties were interested in financial well being of each other, thus this was a partnership and not a joint venture agreement. In the case of Re Ruddock (1879) 5 VLR (IP M) 51 the court ruled that even where the agreement stated that a person should not be considered as a partnership of the business they can be considered as partners in case it is evident they the requirements of partnership have been fulfilled. The right to participate in profit was held to be an authority of establishing partnership. The case provided that the relationship with respect to a partner is determined with respect to their rights in the business and not the wordings of the agreement. In the case of Wiltshire v Kuenzli (1945) 63 WN 47 Roper J stated that in order to determine the relationship of partnership not only the statutory rules but the whole circumstances surrounding the case has to be considered by the court. The court provided that if the parties to the partnership agreement agree to all things which show that they have indulged in a partnership, no contrary words can show that they do not have the intention to be bound to each other actions. In case the facts of the situation are ambiguous than the expressed intention of the parties stating that they do not want to be bound as partners has to be considered to determine partnership. However if there are clear facts which state that the relationship is a partnership the expressed intention by the parties to it is meaningless. As per the partnership act the receipt by a person to share profits is the main evidence to establish the relationship of partnership however mere contingency and profit variation in relation to the business done not establish a partnership relationship by itself. The principles have also been discussed in the case of Cox v Hickman (1880) 8 HL Cas 268 and Television Broadcasters Ltd v Ashtons Nominees Pty Ltd (No 1) (1979) 22 SASR 552. In the given circumstances it has been provided that violet not only wants to share profits but also wants additional control over the business. It has been expressly stated in the agreement that she does not want to be a partner of the business. However as per the above discussed case laws it has been analysed that even if the agreement states that a person does not want to be a partner he can be held as a partner upon the analysis of the other circumstances of the agreement. Therefore the fact that it has been provided by agreement between Violet and Rose that Violet is not a partner would not make her evade the liabilities of a partner. In addition the Violet is not only sharing profits in the business but by checking the books of accounts and with the right of quarterly business statements she has a significant involvement in the business. From such terms it can be determined that the she is also impliedly carrying on the business in common cause with Rose and Mary. Therefore giving relevance to the overall agreement she has with Rose she has to be regarded as a partner. Legal position of Sonny Section 7(4)(b) of the PA states that an agreement with an agent or employee of a person for remuneration through share of a profit does not make such person a partner of the business itself. Section 7(4)(d) further states that if a person lends money to the business and has a contract in writing with respect to which such person is entitled to get a interest rate changing with, or a sharing of profit from carrying out business does not become itself a partner of the business. In the given situation Sonny who is also the employee of the business has provided a loan of $10000 to the business in relation to a contract with Mary. The terms of the contract state that as a consideration of making the loan Sonny is entitled to receive a profit or loss of one-eight share of the firm. As discussed above as per the principles of the Ashton and Cox case mere sharing profit in the business does not make a person a partner. In addition the PA through the above discussed subsection 7(4)(b) and 7(4)(d) mere profit sharing does not make a person a partner of the business. In the case of Federal Commissioner of Taxation v Whiting (1943) 68 CLR 199 it was specifically provided by the court that advancing money in the form of loan by a person does not make him a partner of the firm itself. In the given situation as per the consideration of providing loan Sonny is only entitled to profit or loss and not other control over the business. Therefore through the application of the common law and statutory provisions it can be said that Sonny is not a partner of the firm. Conclusion It has been derived through the above discussion that Violet is a partner of the firm along with Rose and Mary, whereas Sonny is not. As per the provisions of partnership all partners are agents of each other and bound to each other actions. Here Rose and Mary have gone on a vacation and the business is still suffering losses. Even of this fact was not disclosed to Violate and even when the agreements provides that Violet is not a partner, she is liable to be bound to all actions of the business. Therefore she has the liability to repay the loan to Friendly bank along with Mary and Rose References Callison, J. W., Sullivan, M. A. (2012). Partnership Law and Practice: General and Limited Partnerships. West. Canny Gabriel Castle Advertising Pty Ltd Anor v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Corporation Act 2001 (Cth) Cox v Hickman (1880) 8 HL Cas 268 Federal Commissioner of Taxation v Whiting (1943) 68 CLR 199 Lang v James Morrison Co Ltd (1911) 13 CLR 1 at 11 Morse, G. (2010). Partnership law. Oxford University Press. Partnership Act 1963 (Cth) Television Broadcasters Ltd v Ashtons Nominees Pty Ltd (No 1) (1979) 22 SASR 552. Wiltshire v Kuenzli (1945) 63 WN 47