This part of the paper conducts a research on the bakery business in Australia form the legal point of view. The part discusses which type of business structures are used in the industry based. The report provides information about on the rights and liabilities of such business structures and the administrative costs involved in them. The paper also conducts research on the type question that whether the turnover and size of the business affects the structure which is chosen by the businesses.
There are primarily four types of business structures which are usually used to carry out business activities namely.
Each type of business structures have their own advantages and disadvantages and are particularly suitable for specific type of business activities. The report conducts research in the bakery industry and find out which type of business structures are predominantly used in the industry and which would be most suitable for the present requirements of the clients.
The rights and liabilities of the business structures
As discussed above, each business structure is inclusive of their own advantages and disadvantages. For instance, a sole proprietor is liable for all the liabilities arising out of the business activities whereas on the other hand they have supreme control over the affairs of the business. In case of partnership the partners can be haled liable because of the actions of the other partner and on the other had they have the liberty of sharing liabilities. An incorporated private corporation several restrictions imposed on them by law such as financial reporting and directors duties whereas they have limited liability of its members. A public incorporated organization has various restriction imposed on them by laws such as mandatory financial reporting, conducting Annual general meetings, public disclosure requirement and is very costly to operate on the other hand its members are protected by the principles of corporate veil and thus their members are excluded from liability for the actions of the organization as provided by the Corporation Act 2001 (Cth)
The bakery business which the clients have expressed desire to enter into is covered by the food and beverage industry. As provided by the Spencer & Cantatore, (2016) the food and beverage industry is a kind of industry where all four types of business structures which have been discussed above are used. The large industries such as Bakers Delights, Mrs Mac’s Pies and Balfours are all public companies registered in Australia whereas; there are a few private companies in Australia, which are associated with bakery business such as Baking Humans Pty ltd (Cauvain,2015). The small business in the industry is usually carried out through the use of partnerships and sole proprietorships such as Berry Bakery and The Braidwood Bakery.
The business structures have different level of operational costs involved in it. For instance a sole proprietorship has the least operational cost involved along with a partnership. Whereas when it comes to incorporated companies private companies are less expensive to operate as compared to public incorporated companies. Thus is because the level of compliance with the legal obligations in incorporated organization particularly the public companies are very high which raises the cost of compliance and subsequently the operational cost. The large organizations have to comply with several legal obligations, the non compliance of which would result in legal liabilities for them in relation to the Corporation Act 2001 and The Australian Investment and Securities Commission Act 2001. In addition the cost of incorporating an organization is very high compared to that of sole proprietorship or partnership and the process involved in the incorporation is also comparatively very complex.
According to the trends in bakery industry or any other industry where all sizes of business operate it is clear that there is no predominant type of business structure. The business structures are chosen by the businesses in accordance to the size and turnover of the business. There would be no point in adopting the structure of an organization where the business is relatively small is size and the turnover is low. Whereas high turnover and big business where the risks of liabilities is high would not adopt sole proprietorship or partnership as they would be subjected to high risk situations. Large businesses often need large funding which can only be obtained in from of a public organization. Therefore the size and the actual turnover of the business is taken into consideration by the businesses in order to determine which type of business structure would be best suited for the organization.
This part of the report is addressed to the supervisor so as to notify him that due research has been conducted after sensibly weighing the alternative in order to come to a proper recommendation for the clients. In the advice which has been provided to client in relation to the chosen business structure it has been suggested to them that they must carry out the bakery business in form of a sole proprietor. The following are the reasons why such advice has been provided to the clients
The purpose of the above conducted research is to let the clients know that what kind of business structure should be used by them in order to successfully operate a small bakery shop in your town. It has been provided to us with the information that both of them are in your fifties and the motive behind these business ideas is not only to make profits but also to train the youths of the town. The report will conduct research in relation to different structures which can be used for the purpose of fulfilling the objectives of the chosen business with respect to a legal point of view (Dunn, 2014).
The research has been conducted in various legal aspects of business structures to ensure that the best possible advice can be provided to the clients in relation to their business. As provided by Davies, Brough & Johnstone, (2014) the sole trading is the simplest structure to set up and continue operations. The business has very few disclosure requirements and there is no need for a separate business account. However it is compulsory for such businesses to maintain a financial record for the previous five years. The business may have be subjected to provisions like the Fair Work Act 2009 if it employs individuals. The business would also have the need to comply with the National Employment Standards. In case employees are employed by the business workers compensation insurance along with superannuation contributions have to be complied with. In addition through the research it was discovered that it is very easy to change a business from sole proprietorship to any other form of business if there is any future intention to grow the business or to close the business all together. The most important shortcoming of this type of business found through the analysis of various case laws was that the business does not have protection against liability and owner therefore is liable personally for any damage caused to or done by the business (Linton, 2013).
So the research conducted in relation to partnerships it was discovered that every state has its own partnership governing legislation along with the federal legislation known as the Partnership Act 1963. The partnership has almost same features to that of a sole trader the major difference between a sole trader and a partnership is that the working of the partnership is based on the partnership agreement which is agreed upon by the partners upon formation. This means that the control over the partnership business is shared contrary to that of sole proprietorship. The various cases researched on partnership structure of business provide that the business is subjected to regular disputes between the partners. One of the most significant disadvantages which have been highlighted through the research on this type of business is that one partner is held liable for the actions of another even if he was not at fault through the application of the law of agencies. The third parties in this sort of business also have an advantage to claim against the business even if the partners acted out of Authority under certain circumstances (Mohamad et al., 2016).
Through the research it was found at companies are the most common form of business structures adopted in Australia. The primary reason for the popularity of this business structure is that it has an identity which is totally different from its members. This means that it protects a member from any additional liability which they may face in the course of business. However the cost of operation involved in this type of business is highest as compared to any other form of business. Through the various cases researched in relation to companies it was found that companies have majorly been in the Limelight with respect to the actions of the directors. During the last decade various reports against the functions of directors of a company have been made (Rahim & Brady, 2015). The Australian security and investment Commission has been set up to regulate the affairs of incorporated companies in Australia. The company form of business structure includes high level of legal compliance and even minor breaches can result in high penalties. In addition duties are imposed on the managers of such companies to always act in such a way so that the best interest for the company is assured. A public company has to have a minimum of 7 members where as a private company can be started by only two members but they both need a specific amount of capital for incorporation (Simpson & Fisse, 2016).
The recommended business structure according to cost, size, rights, liabilities and turnover for the clients after weighing the alternatives
According to the above discussed positions of the different business structures it can be clearly made out that a structure has to be selected based on the cost, size, rights, liabilities and turnover of the business. As the clients want to carry a business not majorly for making profit and to train the youth, it is advised that they have supreme control over the business affairs and other partners or shareholders may want to extract maximum profit. It is can also be stated that in order to run such business which has a low turnover and small size such as The Braidwood Bakery the cost has to be kept to the minimum. If the company form of business structure is created the cost of operation would be very high with respect to the needs of the client. Thus it is advised to the clients to use a sole proprietorship (Teong & Fukunaga, 2016). This business would also provided unlimited liability for the owners; however this risk can be mitigated by them though the induction of a business indemnity insurance to protect them from liabilities such as negligence. The sole trader has the same identity that of the business and thus the laws of the food industry such as the Food Act 2001, Food Regulations 2002 and Australian New Zealand Food Standards Code (FSANZ) (counting the Food Safety Standards).
Society anticipates that entrepreneurs will comply with the laws of a nation. Thus, it is fundamental that they have a sound working learning of the laws that will influence their operations with the goal that they maintain a strategic distance from punishments, and that they get it what’s more, acknowledge the legitimate duties they owe to all partners. All levels of government force legitimate duties on private companies, and these laws oversee each part of the life of a business:
Before the commencement of the business, a the enterprise must register its name with the Australian Securities and Investments Commission (ASIC). However the proprietor can change the name of the enterprise in which case enrollment is discretionary. Licenses and trademarks should be enlisted with the fitting government body. New business name enlistments require an Australian business number (ABN), and an organization or organization requires its own expense document number. In the event that the business is set up as an organization, it is required to enroll with ASIC to get a Certificate of Registration and an Australian organization number (ACN).
The building and renovation of business premises will be affected by government building directions, and additionally controls relating to the position and size of signage. Fire controls and parking directions will likewise influence the design and area of business premises. The buy or renting of gear forces lawful and money related duties, frequently including legally binding game plans with banks and other money related organizations, and in addition the providers of the hardware.
References
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Cauvain, S. (2015). Process Control and Software Applications in Baking. In Technology of Breadmaking (pp. 213-227). Springer International Publishing.
Crawford-Spencer, E., & Cantatore, F. (2016). Models of franchising for social enterprise. Journal of Marketing Channels, 23(1-2), 47-59.
Davies, B. J., Brough, M., & Johnstone, E. (2014). Food safety strategy template: supporting information.
Dunn, R. (2014). German Bread Making–attracting and retaining apprentices in the Australian industry.
Haque, M., & Quader, S. B. (2014). Empowering Women through Online Bakery Stores in Bangladesh: Barriers and Effective Strategies for Growth and Development. ICT for Development Working Paper Series, 66.
Jacobsen, M. (2013). The Business of Creativity: An expert guide to starting and growing a business in the creative sector. Harriman House Limited.
Johnson, H. (2015). Eating for health and the environment: Australian regulatory responses for dietary change. QUT L. Rev., 15, i.
Khalid, S. M. N. (2015). How and Why to Implement HACCP in Food Businesses in Developing Countries? Suggestions to Afghan Government and Private Sector. Turkish Journal of Agriculture-Food Science and Technology, 3(6), 459-465.
Lang v James Morrison & Co Ltd (1911) 13 CLR 1
Linton, K. F. (2013). Developing a social enterprise as a social worker. Administration in Social Work, 37(5), 458-470.
Mercantile Credit Ltd v Garrod [1962] 3 All ER 1103
Mohamad, A., Rizal, A. M., Quoquab, F., Juhdi, N. H., & Sahimi, M. (2016). Restarting after Business Discontinuity among Bumiputra Small and Medium Enterprises. European Journal of Economics and Business Studies, 2(1), 259-270.
Rahim, M. M., & Brady, I. (2015). The Collective Bargaining Authorization Provision for SMEs in the Australian Competition Law: Serving or Distorting a Public Benefit?. Competition and Regulation in Network Industries, 16(3), 288-306.
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Union Bank of Australia v Fisher (1893) 14 LR (NSW) Eq 241
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