Question

Question

Ruprecht and Lawrence are partners in Trident Holdings, a business which manufactures synthetic cork products. The business is growing and Ruprecht and Lawrence are keen to obtain further capital, export their products and also reward ten loyal long-term employees who have been with them since they started the business. They decide to change their business structure to a proprietary limited company and request your advice as to the following matters:

(a) What is the purpose of the Small Business Guide produced by ASIC?

(b) In what way can a proprietary limited company structure be used to reward employees?

(c) What is the maximum number of shareholders allowed for a proprietary limited company?

(d) Can the business continue to be called Trident Holdings? If not, what changes must be made?

(e) What is the difference between a small proprietary company and a large proprietary company?

(f) Ruprecht and Lawrence How may Ruprecht and Lawrence use the structure of the proprietary limited company to raise capital to grow the business?

(g) Why is a company structure beneficial for a business involved in export?

Answer 1

a) ASI's role is to impose and control company and financial services laws to defend Australian consumers,investors and creditors. ASIC support small business as we legalise all companies,financial markets and benefactors of financial services and consumer credit in Australia and bring about the registration of business names.

b) A proprietary limited company structure can be used to incentivise employees by proposing their own shares to their employees.This support employees to obtain shares in a company at a discount,minus having to borrow or pay any income tax on the discount.

c) In a proprietary company there must be at least of one shareholder and a upper limit of 50 shareholders,excluding employee shareholders.

d) The business can not continue to be called Trident Holdings.This is because,partnership can not be a director or member of a company. If the identical business name is held by a trust or a partnership,the name is not available to the company.You will need to transfer ownership of the business name to the company or an individual that is a current director or member of the company if you want to use it.The following changes must be be made:

• company type
• a company resolution
• officeholder details
• the shares details
• a company financial year

e) A small proprietary companies need not arrange official financial statements or have them audited although a large proprietary companies must arrange financial reports in agreement with accounting standards,have them audited,send them to shareholders and lodge them with ASIC.

f) Lawrence and Ruprecht can use the edifice of the proprietary limited company to increase capital to grow the business by proposing their own shares to current shareholders or their employees.Typically,proprietary raises money by retrieving credit from financial institutions or are sponsored by their directors.

g) There are diverse forms or business structures in which you can set up your import or export enterprises and they comprise: the sole proprietorship, the partnership,the corporation, and,a limited liability company. Each form has its own advantages and disadvantages.The business structure helps one to know how he or she is aspiring to became.Also the business structure aids one to regulate if he or she is willing to risk personal assets for his or her business.The business structure will also help in defining if you want to grow your business alone,are you in this business for long haul and if the tax savings important to you.