Corporations Law

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Week 1: Difference between Business Forms

 

Sole Trader Company Partnership
Formation Minimum legal
formalities
Easy to form
Registration is
compulsory

Expensive and lengthy
procedure of
formation

Easy formation

Registration is optional

Members Single owner with
all profits attributable
to himself
Minimum 2, private
company 7-50

Minimum 2 and maximum 10 for banking

Capital Contribution Limited finance
options
Large financial
resources options

Limited but more finance options as compared to Sole Traders

Liability Unlimited liability Limited liability

Unlimited and joint liabilities of all partners

Control and Management Owners can take
all decisions
Quick
decision making
Separation between
the ownership and
management
Decision
making is a bit long

Partners takes the decision and consent of all partners are required due to which decision making can take long time

Continuity Unstable business
and the owner is
regarded as one
Stable because of
having separate legal
identity

More stable but can be affected by the partners status

Profit Sharing No profit sharing
required
Profits are attributable
to shareholders in
terms of shares

Profit is shared amongst partners according to capital contribution ratio

 

Week 2: Legal Consequences

A partner acts as an agent of the other partners and for the firm. Allison’s acts bind the firm and Terresa to pay for the jars out of the personal savings equally. The partners are jointly responsible for the purchase of the jars  (Sjostrom, 2019). Each partner is jointly and severely liable to pay for the debts of the firm as each of the partner acts as an agent for the other  (Sjostrom, 2019). Under the agency law, a partnership firm is liable for losses or debts incurred as a result of actionable comment if the partner acts in the ordinary course of business. Under Section 306 of RUPA, all partners are liable for all the obligations of the partnership unless and otherwise agreed by the claimant or provided by the law (Sjostrom, 2019). Hence, Alison was conducting her duties in the normal course of business, the losses incurred are jointly and severely the liability of both partners.

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