Background information

Jack and Jill have been best of friends since high school. Jack is currently employed as physical education teacher and Jill is a nutritionist. After working many years as employees they have decided to join forces and set up a Fitness Centre. They come to your office and seek your advice in setting up their new business venture.

Jack would like to know and understand what his obligations and liabilities are as co-owner and director should he and Jill elect to set up a company.

Task

You have been asked by your managing partner to write a draft letter of advice for Jack and Jill which addresses their concerns. In particular the letter of advice should address the following:

1.What are the various business structures that are available to Jack and Jill with respect to the type of business that they would like to establish.

2.Assume that a company structure is the most appropriate business entity to operate the Fitness Centre and provide advice on:

(a)the type of company to be formulated;

(b)the various types of obligations and liabilities that each director is subjected to; and

(c)can Jack and Jill be employees of the company.