Assignment Task :

Your Brief
In this problem, you are working at an accounting firm. Your overall task is to advise clients on the business structure that is most suitable for their plans, a partnership or company. The clients’ circumstances are extremely important considerations. You should also avoid any advice on taxation. You may assume that the clients specifically instruct you not to advise on taxation.

The Clients
Your clients are three adult members of the same family - two sisters, Greta and Mariana, and one brother, Ted. Greta, Mariana and Ted attend your office and they want advice. Greta, Mariana and Ted want to open a business which supplies imported Russian food to restaurants. They think this will be a profitable business because there is a lot of demand for Russian caviar and vodka in Melbourne.
Mariana and Ted think that a partnership is a suitable business structure, but Greta thinks that a company is the most suitable business structure. The clients have expressed concern that third parties could take legal action against them or the business structure once the business is operational.
 

Your Task
Part A – Written report

You need to write a report to your supervising partner, Rebecca. Rebecca has asked you to provide her with a report which explains:
1. the costs, administrative and regulatory burdens of setting up and running partnerships and companies;
2. the potential liability to third parties for the two business structures of interest, the partnership and the company, and their participants;
3. the importance and differences of the fiduciary duty owed in the operation of the two business structures, the partnership and the company. The clients were confused by the term fiduciary duty and its relevance to the two business structures, so Rebecca wants you to explain the duties of partners in a partnership and the duties of directors in a company, and the difference between them;
4. your recommendation on which business structure would best suit the clients planned business. You need to be specific and explain why you recommend a particular business structure. If you choose a company, what type of company is most suitable? If you choose a partnership, what type of partnership is most suitable?

 

Part B – Oral advice to clients
Having reported to the supervising partner, you should assume that you have been authorised to provide an advice as detailed below to the clients who make the final
decision, not you. In answering their questions and providing general advice you have to explain the law to them in terms that they can understand and give your reasoning. One of the challenges of practice is to advise clients about technical matters in words that , they can understand, and that is what you will be marked on in this part. It should not be a repeat of the report to the supervising partner because the client cannot understand technical legal terms. Nor should you be reading from a script (like a newsreader) as that would suggest to the client that you do not understand what you are talking about. If you understand what you are advising, you should be able to talk about it to the client without reading from a script. However, you may have some notes to prompt you about what to say. There is nothing wrong with hesitating when you advise, because that is quite natural in real life – it shows that you are thinking.
From your comments at the initial meeting the clients have requested further advice about:
1. how partnerships are set up;

2. whether written partnership agreements are recommended;
3. whether partners must always share equally in profits and losses.
4. how partnerships are dissolved, and if there is no partnership agreement the order in which partnership assets are distributed after dissolution. For example, the clients want to know who gets paid first, second, third, etc from the assets after dissolution of partnerships.

 

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  • Posted on : April 06th, 2019

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