Business Structures Flashcards
Sole trader
One man show, business owned and run by one person. Owner=business. Entitled to all profits, have full control and unlimited liability.
Three responsibilities: owner, manager, risk taker
Partnership
S3(1): partnership is the relation that subsists between persons carrying on business in common with a view of profit.
Disadvantage and advantage of partnership
Disadvantage- unlimited liability, shared control, shared profits, lack of permanence (will come to an end at some point).
Advantage- flexible, simple, informal, pool capital and experience and shared liabilities.
Dissolutions of partnership
S34 (1)(a)- if for a fixed term, by the expiration of that term
S34 (1)(b)- if for a single adventure or undertaking, by the termination of that adventure or undertaking
S34 (1)(c)- if for an undefined time, by any partner giving notice to the other or others of his intention to dissolve the partnership.
S35 (1)- subject to any agreement between the partners, by the death or bankruptcy of any partner.
S26- by the happening of any event which makes it unlawful for the business to carry on or for the members of the firm to carry it on in partnership.
S37 by the court on application by a partner, in the following cases:
A. When a partner is found lunatic or is permanently of unsound mind
B. When a partner, becomes permanently incapable of performing his part of the partnership contract
C. When a partner, is guilty of conduct that prejudices business
D. When a partner, willfully or persistently breaches the partnership agreement
E. When the business of the partnership can only be carried on at a loss
F. When in the opinion of the court, render it just and equitable that the partnership be dissolved.
Company
S20- a company is treated as a legal person
Companies are liable for their own debts, can sue and be sued in their own names, can hold properties.
Solomon v Solomon
When company went into liquidation, creditors argued that Salomon could not recover the loan because he really was the company and the seven members were not independent of the registered company.
Held: the company has a legal existence seperate from the members. Members have limited liabilities.
Corporate veil
The court might pierce or lift the corporate veil when necessary. This might be done to make the members of the controllers responsible for the act of the company (owners that abuse the seperate entity).
Lifting corporate veil- seperation of company and shareholders or others owning the business is gone. They are treated as one.
