Understanding Company Law

Question: Discuss about the Understanding Company Law Australian legal system. Answer: Prepare a consultative report In this case, Xiaojing, Lance and Nick want to work together for operating their herbal product business. For running the business, they have decided to explore the unincorporated business structures, particularly if partnership and a joint venture. Generally, people are confused regarding a partnership and a joint venture. They do not know if a difference is present between these two. The result is that sometimes these two terms are used interchangeably. Also on the face of it, these two terms may appear to be the same but the fact is that certain differences are present between the two. Even if it is difficult to differentiate partnership and a joint venture, however, there are certain key differences present between them. It also needs to be mentioned at this point that under the common law, the term joint venture does not have a certain meaning in Australia. The result is that there is no precisely a definition of a joint venture. However there are certain characteristics on the basis of which it can be said that a particular agreement is a joint venture (United Dominion Corporation Ltd v Brian, 1985). A joint venture can be described as an agreement that has been concluded between two or more individuals or legal entities, where the parties have decided to work together for the achievement of the same strategic goal. But at the same time, maintaining a separate business entities. In this case, each of the party will be liable for the debts that have been incurred by such a party in the project and, generally, at the end of the project, they will divide the profit between themselves (Pentony, Graw, Lennard Parker, 2009). Typically there is a return to joint venture agreement, which governs the relationship between the parties. There are several long-term and short-term projects, for which the parties may decide to enter a joint venture. Some of the examples of the joint ventures include property development, publishing agreements, mining syndicates and research and development agreements. A joint venture provides certain advantages to the parties, regardless of the size of the business. This is due to the reason that the following types of arrangements can allow the growth of the business without the need for seeking outside investment or borrowing money, the expansion of the business, developing new products and services, gaining access to additional resources like specialist staff or technology, and in this case, there is only a temporary commitment towards each other. Therefore, if a joint venture has been structured properly, it can prove to be highly profitable. They can be used by the parties to collaborate on short-term projects and also for strengthening the long-term projects (Lipton, Herzberg and Welsh, 2016). However there are certain disadvantages associated with the joint ventures. These disadvantages include the difficulty in finding the right people and creating a trusting and strong relationship. Similarly, it is important that the objective, terms and goals of the venture are clearly understood by the parties so that there is no conflict between the business partners. In some cases, the business partners may not commit to the project to the level that is required for the success of the joint venture. A joint venture is governed by the terms of the agreement. At the same time, the provisions of contract law and common law are also applicable to a joint venture. On the other hand, if a separate legal entity has been incorporated for this purpose, it will be the one by the Corporations Act, 2001 (Cth). In comparison, a partnership can be described as an ongoing relationship between the parties. Generally, the number of partners is limited to 20. However, as against the company, a partnership is not a separate legal entity. Therefore each partner can be held liable for the actions of the other partners (Harris, Hargovan and Adams, 2015). This can be described as a major difference that is present between a joint venture and a partnership, as in this case the partners are jointly and severally liable for the activities of the other partners. Therefore, in case of a partnership, a partner can be held responsible for the debts of the partnership, in case the partners are not in a position to pay. Similarly, another difference that exists between a partnership and the joint venture is that the joint venture does not manage an ongoing relationship, and generally in this case it has a definitive end. On the other hand, a partnership is an ongoing relationship. The legislation that is appl icable in case of a partnership is the Partnership Act. A partnership agreement provides certain benefits to the parties. These benefits include the easy establishment of a partnership and lower startup cost. A partnership provides a chance to split the income of the business. Whenever required, the business structure can be changed quickly. In case of a partnership, less external regulations applicable as compared to a company. Similarly, the business affairs of a partnership are private (Vermeesch and Lindgren, 2005). But at the same time, the business structure of a partnership also has some disadvantages. In case of a partnership, each partner is considered as being jointly and severally responsible for the debts of the business. Similarly, each partner can be held liable regarding the actions of the other partners. The profits of the business have to be shared with the other partners and other major disadvantage. In case of a partnership is of unlimited liability. On the basis of the above-mentioned discussion, it can be said that the business structure of a partnership will be more appropriate for Xiaojing, Lance and Nick. The reason is that in case of a partnership, there is an ongoing relationship between the parties. On the other hand, a joint venture has a pre-decided date when it comes to an end. As in this case, the parties are going to operate a horrible product business, it will be appropriate for them to create a partnership. References Harris, J. Hargovan, A. Adams, M. (2015) Australian Corporate Law LexisNexis Butterworths 5th edition Lipton P, Herzberg A and Welsh, M, (2016) Understanding Company Law, 18th edition Thomson Reuters. Pentony, Graw, Lennard Parker, (2009) Understanding Business Law 3rd ed Butterworths Vermeesch, R B, Lindgren, K E, (2005) Business Law of Australia Butterworths, 11th Edition Case Law United Dominion Corporation Ltd v Brian (1985) 157 CLR 1 Legislation Corporations Act, 2001