Business Structure Of Australia, Particularly Company And Trust

3) The interest resulting from the debt also will cost to the company even it is taxable. The interest is fixed base on the level of the debt even the company does not generate profit. This would need to be careful when take on the debt comparing to use its own capital. And the creditor may come to intervene on the business when the company has difficulty to service its debt.

In the above case, Alexa Ltd is insolvent. According to section 95A, “A company is if that company could not payback its debts as and when the become due.” Section 588G can be applied if the person is a director at the time company incurs a debt, company becomes insolvent as a result of the debt and there are reasonable grounds for suspecting that company is or would become insolvent. A director is liable if at the time the debt occur, he was aware of the presence of reasonable ground to suspect insolvency or a person in a similar position in similar firm would have been so

* The liability does not fall on one individual instead it is assumed by the business in a corporation. Individuals representing the company can still be personally sued in some states.

Liability: Ownership of a C-Corporation is vested in its stockholders, whose liability is limited to the amount of their investment. The Corporation is liable for all of its debts, and for the actions of employees acting as agents of the organization. Creditors may lay claim against corporate assets, but cannot reach stockholders’ personal assets. Additionally, stockholders have no claim against corporate assets.

All companies, including those operating in the multimedia industry are controlled and monitored by the Australian Securities and Investments Commission (ASIC). There are two type of companies, private companies and public companies. Each company has a management team called a board of directors. Usually, each director oversees and makes decisions for a section of a company, for instance a finance department. As companies have more shareholders/owners than unincorporated businesses, they are more accessible to capital to expand and upgrade, although there are strict legal requirements to protect shareholders.

A shareholder in a limited company is not personally responsible for any of the debts of Tesco, other than for the value of his investment in Tesco. Although a shareholder's liability for Tesco's actions is limited, the shareholder may still be liable for its own acts. For example, the directors of small companies, who are frequently also shareholders, are often required to give personal guarantees of the company's debts to those lending to the company. They will then be liable for those debts in the event that the company cannot pay, although the other shareholders will not be so liable.

This is the most common type of company and is what most people have in mind when considering whether or not to set up a company. Each shareholder’s liability is limited to the amount unpaid on the shareholding owned by them. However, the shareholder must also be aware that they run the risk of losing monies paid to the company whether in full or part payment of the shares owned by them.

Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).

Even though Hilary is the managing director and her company owns shares in Carborundum, she cannot be liable to pay due to the idea of separate legal entity, unless the debts was incurred when the company became

Choosing a Corporation/Company Structure - the business structure of a company/ corporation is highly recommended, it has the flexibility to gain more capital, or credit capability and assets used as security. Based on the Corporation Act 2001 (Cth) AC 22, a corporation is another legal entity with their own legal rights, duties and responsibilities separate to the individual or owner of the company (Harris, Hargovan & Adams, 2013, pp 229). The risk and consequences are one of the principal considerations of choosing a company structure (Harris, Hargovan & Adams, pp 50). Based on the “Corporate Veil” Liability is owned by a separate legal entity and not to the extent of the owner, for instance, the debt of the company is not a personal liability, but the company. This is further explained in the case below.

assets of the business owner can be taken to pay off business debts since the two are not

In Australia the corporate failures means the “insolvency” that a company cease its business operation(Michaela 2012, 365-366). The categories of corporate failures are six possible reasons that lead the failure of corporate(Mickelwaith 2006, 2-6). The accounting theory is a way to explain the accounting practice or prescribe how accounting should be done(Michaela 2012, 133-134). Additionally, the corporate governance was defined that the framework of rules, relationships, systems and processes can be exercised and controlled by corporate(Council 2014, 3).

When a company is incorporated it is treated as a separate legal entity distinct from its promoters, directors, members, and employees, which confers the benefit of not being responsible for the companies debt on the members on the company. However even though a company is a separate legal entity and it attains the advantage of not laying the responsibility of company’s debt on the

There is no clear framework of the rules that would cover the contingencies of a ruling to pierce the corporate veil Idoport Pty Ltd v National Australia Bank Ltd. The corporate Veil usually protects owners and shareholders from being held liable for corporate duties. Yet again a decision made by the court to lift that veil and would place the liability on shareholders, owners, administrators, executives and officers of the company without ownership interest. The purpose of this essay is to conduct an analysis on the concept of lifting the corporate veil and to review the different views on its fairness and equitability to present a better understanding of the notion, the methods used was throughout researching the numerous scholars views on the subject, case law and statutes examples, and the evidence provided by the empirical study of Ramsay & Noakes. When we discuss the lifting the corporate veil the first case that pops out is the case of Salomon V A. Salomon & Co Ltd, since the decisions of applying the corporate veil were first formed as a consequence of this case. The idea covers all of company law and distinguishes that a company is a separate legal entity from its members and directors. Furthermore, spencer (2012); have indicated that one of the core principles that followed the decision in Salomon v Salomon was the wide acceptance one man company’s. However In order to form a

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.