Deck 2: Business Organisations

Question 1

The concept of limited liability applies to associations created under the various states' Associations Incorporation Acts even though those entities are not formed under the Corporations Act 2001 (Cth).

Answer 1

True

Question 2

When making a decision on which business structure to use many factors must be taken into account including taxation, costs, personal liability.

Answer 2

True

Question 3

Only a company can be appointed as trustee in a trust relationship.

Answer 3

False

Question 4

Since corporations are created under the Corporations Act 2001 (Cth) they can never serve as trustees of trusts which are created under state law.

Question 5

Cooperatives are never allowed to generate a surplus.

Question 6

A hybrid business structure can allow consolidation of control, regulatory arbitrage and asset protection.

Question 7

Which of the following is the best description of a joint venture?

A) A and B carry on a restaurant business together.
B) A and B own land together, A owns 30% and B owns 70%.
C) A and B own land together in equal parts, their interests are created at the same time and they agree that if either dies, the other person will automatically receive their share.
D) A and B have agreed to stage a concert together and have agreed to share the gross returns, but this is the only time that they will do this.

Question 8

Hansel and Gretel form a partnership for their business making ginger bread houses. Before making any ginger bread houses, Hansel instructs Gretel to find a warehouse to store the ginger bread houses that the partnership will be making. Gretel finds a large warehouse in Burleigh Heads and enters into a lease with the landlord on behalf of the partnership. When Hansel inspects the warehouse he is disappointed as it is not what he expected. He informs Gretel that he no longer wishes to proceed with the partnership. Which of the following is the most correct answer:

A) It is likely that Hansel would incur no liability with respect to the warehouse lease as he did not sign the agreement.
B) The lease would most likely be binding on the partnership if the partners ratified it as it is a pre-registration contract.
C) Hansel and Gretel would be jointly and severely liable on the lease as they are partners.
D) The lease is not binding because at the time it was entered into no partnership existed and thereby it is not binding against anyone.
E) Hansel is not liable on the contract because Gretel signed it and he has validly terminated his interest in the partnership.

Question 9

Hoytie Pie Pty Ltd has 100 issued shares. 99 of those shares are owned by David. The remaining share is held by Paul in trust and David is the sole beneficiary of that trust. David is the only director of Hoytie Pie Pty Ltd. When Hoytie Pie Pty Ltd was registered, it adopted a comprehensive constitution which modified all the replaceable rules applicable to Hoytie Pie Pty Ltd.

A) David cannot be an employee of Hoytie Pie Pty Ltd because he is the sole director and has control of all the shares in the company.
B) David has a beneficial interest in the share held by Paul.
C) The constitution has the effect as contract between David in his capacity as director and Paul in his capacity as a member pursuant to section 140(1) of the Corporations Act (Cth) 2001.
D) Hoytie Pie Pty Ltd can only enter into a contract if the contract is signed by David as the sole director.
E) Both (c) and (d) are correct.

Question 10

Which of the following is correct:

A) A public company is limited to 50 members.
B) In most instances a partnership can have no more than 30 partners.
C) A trust can only ever have one trustee and the trustee must be an individual.
D) A joint venture is a business that is owned by one person.
E) None of the above is correct.

Question 11

Which of the following is most likely to be deemed a partnership?

A) John and David start a business selling ducks. David is an excellent duck farmer and John is a superb duck salesperson. They agree that they will share the gross proceeds from sales on a 50/50 basis. David will be responsible for his costs associated with breeding the ducks and John will be responsible for his costs associated with selling the ducks.
B) Paul is a plumber. He owns all his equipment in his own name and runs the business in his name. Paul employs Matt and pays him $500 per week plus a bonus of $150 per week if clients are billed in excess of $5000 for the week.
C) Tory and James agree to start a restaurant business called "Sweet Alex". They agree that Tory (who is a chef) will receive 60% of the net proceeds and James will receive 40%. While they have not yet opened the restaurant, they have located suitable premises and are in the process of remodelling it for the business.
D) Louie holds a business in trust for George and Peppa. Pursuant to the trust agreement, Louie is required to distribute the net profits of the business to George and Peppa in equal shares on the last day of each financial year.
E) Chris registers a company called Chris Pty Ltd to conduct a stockbroking business. Pursuant to the terms of the constitution, the company is required to pay a dividend every year to the shareholders in an amount equal to the net profits generated by the company that year.

Question 12

Which of the following is a separate legal entity:

A) Big Drain Plumbing - a partnership formed by Alex and James to conduct a plumbing business.
B) Burleigh Chess Club Inc. - a chess club.
C) Massive Mines N.L. - an Australian listed mining organisation employing 1000 people.
D) All of the above.
E) Both B and C.

Question 13

Which of the following types of cooperative is regulated under the Corporations Act 2001 (Cth)?

A) Producer cooperatives
B) Purchasing cooperatives
C) Digital cooperatives
D) Financial cooperatives
E) Both C and D.

Question 14

Some businesses use a hybrid structure to take advantage of regulatory arbitrage. What is regulatory arbitrage:

A) Quarantining assets in different markets
B) Consolidating control using trusts and subsidiaries
C) Transferring funds between subsidiaries to minimise tax
D) Using a hybrid structure to meet regulatory requirements in the local market
E) Taking advantage of cost differences arising from different regulations that apply in different markets.

Question 15

Compare the manner in which partnerships, joint ventures, trusts and companies are managed.

Question 16

Give an example of when a constructive trust may come into existence.

Question 17

Distinguish between a trading cooperative and a non-trading cooperative.

Question 18

Briefly describe the meaning of 'hybrid business structure'.