Week 11.Ch10.Starting a Business(1)

7/23/2019 Week 11.Ch10.Starting a Business(1)

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Chapter 10Chapter 10

Starting aStarting a

businessbusiness


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Chapter 10 | Starting a business

1. Preparation

2. Selecting a business structure

3. Licences and registration

4. Renting or buying the premises

. !ranchising

". #pening $or business


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Preparation

Chapter 10

Starting a business


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Preparation

%e$ore a person starts trading& theyshould'

do some research&

protect the (P&

prepare a plan&

raise some money& and

ta)e out insurance.


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Selecting a business

structure

Chapter 10

Starting a business


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%usiness structures

*hen starting a ne+ business one o$ the mostimportant legal ,uestions a person +ill ha-e toans+er $or themsel-es is +hich business structurethey +ill adopt. business structure is the legal $orm

o$ a business organisation. /he most common types o$ business structure are'

the sole trader&

the partnership & and

the company. ote that these business structures are not mutually

eclusi-e. /+o or more companies& $or eample& can$orm a partnership.


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%usiness structures continued

/he persons choice o$ business structure+ill ha-e important conse,uences in termso$'

the ease and cost o$ setting up thebusiness&

their legal and nancial liability&

the +ay they pay ta& their ability to raise nance& and

their ongoing regulatory obligations.


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Sole trader

person is a sole trader i$ they directly o+nand operate the business by themsel-es.

sole trader'

may engage employees but they are thesole o+ner o$ the business&

has sole responsibility $or raising the $undsto start the business&

has sole control o-er the operation o$ thebusiness& and

is entitled to all o$ the prots o$ the business.


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Sole trader continued

/he sole trader has unlimited personalliability $or the debts and other legalobligations o$ the business.

/here are no $ormal legal re,uirementsthat need to be satised to establish this

type o$ business structure.


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Partnership

person is a partner in a partnership i$ theyand at least one other person directly o+nand operate a business together.

Mutual liability' ach partner is both theprincipal and the agent o$ the otherpartners.

ach partner has unlimited personal liability

$or the debts o$ the partnership.

Partnerships are regulated by State5/erritorypartnership legislation.


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Partnership continued

/here are no $ormal steps that need to beta)en to $orm a partnership.

partnership is 6the relation +hichsubsists bet+een persons carrying on abusiness in common +ith a -ie+ o$ prot.($ each o$ the elements o$ this denition issatised a partnership has been $ormed.


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Persons' /here can be no more than 20 partners7sub8ect to certain eceptions9.

Carrying on a business' /here must be somecontinuity or repetition o$ trading acti-ities.

In common' ach person must be acting onbehal$ o$ the others as +ell as on their o+nbehal$.

With a view of prot' ($ the persons arecarrying on a business together $or a non:protpurpose they +ill ha-e $ormed an unincorporatedassociation rather than a partnership.


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/he relationship bet+een partners is acontractual one. /he terms o$ the contract areset out in the partnership agreement +hichmay be'

a $ormal +ritten document&

partly in +riting and partly oral& or

+holly or partly implied $rom the conduct o$

the partners. +ritten partnership agreement is not essential

to the eistence o$ a partnership& but it isne-ertheless a -ery good idea to ha-e one.


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+ritten partnership agreement should set out' /he names o$ the partners and the name o$ the

partnership /he nature o$ the business

/he term o$ the partnership ach partners contribution Sharing o$ prots and losses uthority o$ partners ;ecision:ma)ing

;uties and obligations dmitting ne+ partners *ithdra+al or death o$ a partner ;ispute resolution


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Company

corporationis an articial legal personseparate $rom its o+ners and able to ma)econtracts& o+n property and be a party to

litigation in its o+n name.

companyis a type o$ corporation< oneincorporated under and regulated by theCorporations Act 2001 7Cth9.


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/ypes o$ corporation

!igure 10.2


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Company continued

company is created by registration by theustralian Securities and (n-estments Commission7SIC9.

company must ha-e'

at least one o+ner or member 7usually called ashareholder9& and

at least one director& +ho is responsible $ormanaging the companys business.

(t is possible $or the director and the shareholder tobe the same person& although in larger companiesthere is a separation of ownership and control.


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Company continued

Separate legal personality' company'

can incur debts in its o+n name&

can hold property in its o+n name&

can be the plainti= or the de$endant in legalproceedings&

continues unchanged e-en i$ the o+ners sell it toanother person& and

can enter into legal relationships +ith the o+ners.

!imited liability' /he o+ners are not liable $or anydebts or other obligations o$ the company beyondthe subscription price o$ their shares.


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Proprietary and public companies

!igure 10.3


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!icences and registration

Chapter 10

Starting a business


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Registering the business name

>nless a business o+ner proposes to carry onbusiness under their o+n name 7including theirsurname and rst name& or surname and initials9they must register their business namein eachState and /erritory in +hich they propose to carryon business.

/his re,uirement applies to sole traders andpartnerships. ($ the business o+ner chooses to use

a company and proposes to carry on businessunder a name di=erent to the registered name o$the company& the business name must beregistered.


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Registering the business name continued

/he purpose o$ re,uiring registration o$ abusiness name is not to protect the businesso+ners interest in the name but to protect thepublic by'

ma)ing the identity o$ the person or companybehind the business name publicly a-ailableand identiable in the e-ent o$ a problem&and

a-oiding the potentially misleading situationo$ ha-ing t+o businesses +ith the samebusiness name.


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Complying +ith licensing re,uirements

business may re,uire one or morelicences$rom the rele-ant !ederal& Stateor Local go-ernment body.


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"enting or buying the

premisesChapter 10

Starting a business


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%uying the premises

/he process o$ ac,uiring o+nership o$ realproperty is called the con-eyance.


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%uying the premises continued

1. Locate the property.2. pproach the selling agent and

inspect the property.3. ?a)e an o=er $or the property&

and negotiate a price.4. #nce a price has been agreed

upon +ith the -endor& recei-ethe contract 7li)ely to be in thestandard $orm9 $rom the sellingagent. Sign the contract andreturn it to the selling agent.

. Pay the deposit 7usually @ or10@ o$ the purchase price9 ./hebalance o$ the purchase price+ill be payable on thesettlement date& usually 30 or "0days a$ter the date o$ thecontract.

". rrange nance and5or buildinginspection and5or pestinspection.

A. Chec) the details o$ theproperty on the register o$titles.

B. ;etermine +hether the localauthority or any go-ernmentbody has any proposals oroutstanding re,uirements inrelation to the property.

. Chec) that the trans$erdocuments are preparedcorrectly by the -endor& signthem& and attend to theirassessment $or stamp duty.

10. ttend settlement and hando-er the balance o$ thepurchase price in echange $orthe title documents.

11. (n$orm the selling agent thatsettlement has ta)en place&and collect the )eys.

12. ?o-e inD


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>nder the old system o$ title& o+nership isestablished by chain o$ title< under the /orrenssystem o$ title& o+nership is established byregistration.

*hen a person purchases real property theyac,uire'

the land& the buildings& and

the tures 7other than tenants tures9.


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/able 10.4


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Leasing the premises

?ost business lease 7orrent9 their premisesrather than o+n them.

lease is a contract

+ith the property o+neraccording to +hich theproperty o+ner grantsthe business o+nereclusi-e possession o$the leased property inreturn $or the paymento$ rent and compliance+ith other obligations inthe lease.


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Leasing the premises continued

/able 10.A


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#ranchising

Chapter 10

Starting a business


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*hat is a $ranchiseE

franchiseis a contractual arrangement +ith a$ranchisor according to +hich the $ranchisorpermits the $ranchisee to'

use the $ranchisors business name and5ortrade mar)&

manu$acture or sell the $ranchisors products&and5or

use the $ranchisors business system.

(n return the $ranchisee pays to the $ranchisor aregular ed $ee and5or a percentage o$ theirincome or prots.


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*hat is a $ranchiseE continued

)ey $eature o$ the$ranchise arrangementis that the $ranchisorand the $ranchisee are

7usually9 not partners&employer andemployee& or principaland agent& but separatecontracting parties +ho

are generally notresponsible $or eachothers actions.


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/he benets o$ $ranchising

#or the franchisor$

Fro+th o$ the $ranchise net+or) is achie-edusing the nancial and labour resources o$ the

$ranchisee./he $ranchisor need not be concerned +ith the

day:to:day operation o$ each $ranchise outlet.

/he $ranchise net+or) has the potential to

gro+ rapidly./he manager o$ each outlet is the o+ner o$ the

business& and +ill there$ore tend to bemoti-ated to be success$ul.


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/he benets o$ $ranchising continued

#or the franchisee$

Goining an eisting $ranchise is much less ris)ythan attempting to start a stand:alonebusiness.

/he $ranchisor may pro-ide detailed training.

/he $ranchisee o+ns their o+n business.

/he $ranchisee operates under the name and

established reputation o$ the $ranchisor./he $ranchisee +ill usually need less capital.


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/he benets o$ $ranchising continued

#or the franchisee$

/he $ranchisor may pro-ide ad-ice inidenti$ying suitable trading locations.

/he $ranchisee benets $rom the $ranchisorsad-ertising and promotional acti-ities.

/he $ranchisee benets $rom the bul)purchasing po+er and negotiating capacity o$

the $ranchisor./he $ranchisee has access to a large

)no+ledge base.


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!ranchising code o$ conduct

/he #ranchising Code of Conduct see)s to ensurethat a $ranchisee is suHciently in$ormed about a$ranchise be$ore entering into it by'

imposing signicant disclosure obligations on the

$ranchisor& granting the $ranchisee a A day cooling o= period&

and

prohibiting certain terms in the $ranchiseagreement& e.g. release o$ the $ranchisor $rom all

liability.

/he Code also see)s to pro-ide a cost:e=ecti-edispute resolution scheme.


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%pening for business

Chapter 10

Starting a business


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Shop trading hours

>nder the rele-ant State5/erritory tradinghours legislation'

?onday to Saturday trading hours may

be restricted& and Sunday trading may be prohibited

outside o$ ma8or to+ns and touristprecincts.


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Setting up a +ebsite

business can operate an online business24 hours a day.

;omain name disputes can usually beresol-ed +ithout resorting to litigation byusing either the au; or the *(P# disputeresolution process.


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Setting up a +ebsite continued

/he holder o$ a domain name mustsurrender that domain name i$'

the domain name is identical or

con$usingly similar to a trade mar)& the domain name holder has no rights to

or legitimate interests on the name& and

the domain name has been registeredand is being used in bad $aith.


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&e't

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Week 11.Ch10.Starting a Business(1)