Week 5 Lecture slides

Week 5 Lecture slides - Choosing a business structure...

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1 LAW101 Law, Business Week 5 Business Structures Part 2 Choosing a business structure • Types of business organisations –Sole trader –Partnership –Companies –Trusts • Each business structure has relative advantages and disadvantages. Different business structures have different implications for liability and control . Need to consider the different types of business structures and gain an understanding into the different legal implications they present. Choosing a business structure Trusts A trust is a creation of equity where a person (the trustee) holds property or income for the benefit of another (the beneficiary) . The usual parties in a trust are the settlor (the creator), the trustee (legal titleholder) and the beneficiary (beneficial owner). Elements – the trustee, trust property and the beneficiary Trusts SETTLOR The person who creates a trust by transferring property to a trustee TRUSTEE A person who holds property belonging to another on trust for the benefit of others BENEFICIARIES A person/people for whose benefit property is held by a trustee Trusts Duration • The duration of a trust may be stated in the trust itself or may be implied from the terms of the trust. • Trusts cannot last indefinitely. The trust property must vest in a particular person or persons within the time period allowed by the law.
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2 Trusts Trusts compared with other entities • A trust is merely a relationship; the trust does not have a separate legal identity to its parties. • Unlike a partnership, a trust does not involve a contractual relationship between all the persons. • The trustee owns trust property. – Contrast this to a company which owns its own assets. – Contrast also to a partnership, in which all partners together own trust assets. Trusts Trusts can be classified in many ways, including: • How they were created: – express trusts; – implied trusts; – constructive trusts. • The nature of the beneficiaries’ interest: – fixed trusts; or – discretionary trusts. Trusts Types of trusts: 9 Discretionary trusts - eg. Family trusts 9 Fixed Trusts - eg. Unit trusts Business/Commercial trusts ± Trading trusts eg. superannuation trusts Trusts Based in equity - trustees owe : – Fiduciary duties • to act bona fide in beneficiaries’ interests; • to exercise their powers for proper purposes;
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Week 5 Lecture slides - Choosing a business structure...

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