The topic for this week is incorporation and its effects

The Case Study Basic Facts

Abigail Apple and Zane Banana own and operate a business called Pies Peas and

Mash which is a small business located in Devonport in Tasmania.

The business currently operates out of Abigail's home in Devonport where she and Zane make vegetarian pies for sale through both a food van and a small number of cafes based in Devonport and Launceston in Tasmania.

The business is independently owned and operated by Abigail and Zane with the help of paid employees.

Currently the business employs the following people:

1. Abigail Apple - Full time Manager and joint owner of the business
2. Zane Banana - Joint owner of the business
3. Ben Carrot - Pastry chef employee of the business
4. HeathTurnip-Driveremployeeofthebusiness
5. Bobby Beetroot - Casual employee of the business

Case Study 1

Please read the basic facts about the business Pies Peas and Mash set out above. The business has been operating successfully as a partnership for some time. The business is operating out of a commercial premise in Devonport and is now employing four people:

- Barbara Apple;

- Heath Turnip;

- Bobby Beetroot and

- Boris Beetroot (15-year-old part time employee) -

The three partners also all work at least thirty hours in the business but both Zane and Ben also work in other local businesses. Abigail does not want this to continue. She suggests it is time to incorporate a company structure and for her and Zane and Ben to all be directors of the new company PP & M Pty Ltd.

The three partners have approached you to provide advice about how they move from a partnership to a company. They are concerned because the assets are all owned by the partnership and they are unclear how to 'sell' the business assets to the newly formed company. They are also wanting advice on what is meant by the terms 'separate legal entity' and 'limited liability'?

Case Study 2

Please read the basic facts about the business Pies Peas and Mash set out on page 4 above. The partners are wanting to establish a company. Please read the facts in relation to this as set out in the facts for case study 1. The partners are not sure of the real differences between a small and large company and the differences between a proprietary company and a public one. At this stage they believe that they should establish a small proprietary company is this right? They also seek your advice about the basic steps required to set up a company and how difficult it may be to change from a propriety company to a public one and when this might be something for them to consider?

Short answer question 19

What is the significance of the case of Salomon v Salomon (1897)?

Short answer question 20

What are the major roles and powers of the Australian Securities and Investments Commission (ASIC)?