Tony is a Perth-based entrepreneur who has been developing artificial intelligence software using a machine-learning algorithm to randomly generate and compose pieces of music.

Tony believes his technology will have numerous applications, particularly in the marking and advertising space. However, he is aware a lot more work is needed to develop the technology into a commercially viable product.

Tony's daughter, Morgan, is currently completing her PHD in Computer Science and has been instrumental in helping Tony develop the code. Tony wants to start the business soon because he wants to create a stream of passive income for retirement and also set up a trust fund for his children, Morgan and James. Before he can retire, he wants to ensure that any income generated by the business stays in the business for future development purposes, and also channel some money into the bank-accounts of his children, to help them out.

Morgan is keen to join the business in one to two years' time when she has completed her PHD. She has limited capacity to take on extra work now but has agreed to help Tony when she can.

To get things started, Tony will have to take out a loan from the bank.

Tony asks you whether a sole-trader entity or a private incorporated entity would be best for his situation. Compare and contrast the two business structures and suggest which would be best. (5 marks)