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?

You must address all the above points in your report.

Your supervising partner is assumed to be an experienced professional who probably knows the law you are reporting, although she may not know the detail and may not remember case names and section numbers, which you must reference properly. You should use footnotes for referencing so there should be no need for a Reference List or a Bibliography at the end of the assignment. However you must provide sources of any resources you draw on in the answers.

You can therefore speak in technical terms to the partner. The purpose of reporting to your partner is not to teach her the law they already know but to convince her that you have done your research properly and that you have weighed up the issues sensibly. The supervising partner needs to be satisfied of this in order to authorise you to advise the client. You can also assume that the supervising partner is aware of the first meeting and the inquiries from the clients.