Choosing Partnership Structure For 'The Happy Hills' Boutique Hotel Essay.

Advantages of a Partnership Business for 'The Happy Hills'

Write about the Corporations Law for Hospitality and Catering.

In the instant case there is family consisting of two couples, Thomas and Hillary and their children, Jackie and Karl. They plan to open a modest boutique hotel named as ‘The Happy Hills’. In order to do so they decided to convert their family home into a hotel. The couples were joint tenants of the family home. The entire family were qualified in the field of hospitality and catering and were confident of their success.

The present issue deals with the decision regarding the kind of structure they should choose with respect to their business. The most suitable form of business would be partnership business. They would need very less capital to start the business. They would not have to deal with much hassle in securing funds for the business[1]. They will be able to keep the reins of the management in their own hand. The entire family will be able to contribute their own funds and in case the business becomes profitable they will be able to share the profits as per their contribution. There are various advantages of having a partnership business. The fact that there are many people managing would ensure that the business is run in a proper manner. The risks would be spread equally. In case any member of the family falls sick the others would be able to manage the business in a proper manner[2]. The start up costs would be less. The pressure of pooling the capital would be evenly distributed. In the long run they will be able to increase their funding by bringing in more partners. This would bring in flexibility in the business and make the prospect of growth bright. This would also mean that in case profits would be earned the amount would increase and the shares would also increase.

The biggest advantage of having a partnership form of business is that the formation process is simple and lacks complexity. The regulations are lenient compared to companies. The laws are simpler to adhere. The partners would have their own say in the business. In the absence of shareholders they would receive less interference and would not be answerable to anyone. The management of the business would be very flexible and in the presence of fewer partners disputes would be solved in an easy manner[3]. All the family members will be able to contribute their ideas in the decision making process. In case there was only one owner the decision making process would be problematic. Since the responsibilities are split among many partners, the company would be benefited with their abilities[4]. Other than splitting the financial burden they will also be able to split the work as per their skills. For example if one family member is good at book keeping the other might have expertise in marketing and sales.

However there are certain problems which might arise in partnership business. There are chances of disagreements between the family members. They might have different ideas of running the business. They would disagree on deciding their responsibilities and deciding as to issues that would best suit the business. In case disagreements ensue the impact could be negative and harmful for the business[5]. This would impact upon the relationship of the partners. Thus they should draft a partnership deed while forming the business. This will ensure that all the members are aware of the procedures and policies which are present and applicable in case there are disagreements and disputes. They will also be able to determine procedure of dissolving the partnership if the problems subsist. The flexibility of a partnership business is somewhat less compared to sole proprietorship business. The freedoms are less in terms of management of the business. In case financial liabilities arise, the risk will be equally distributed among the partners. This will happen if the partnership is general in nature.

Disadvantages of a Partnership Business

The family had been advised that they should carry on the business under their own name. If they intend to carry on the business under the name of ‘The Happy Hills’ they would have to follow certain procedures as per law. Thus they have to approach the Australian Securities and Investments Commission (ASIC) for the procedure. Initially they have to provide details of their names and that they are partners of the partnership business[6]. The type of information that they are going to provide will depend on the type of entity the person registering is. If the person registering is acting as an individual, he or she has to provide personal information. This may include details of birth and residential address. If the registration is being done in the name of a company or registered body, the details of the ACN or the ARBN are to be provided. The ASIC will derive the rest of the information from the Australian Business Register as well as from the companies’ register of the ASIC. If the registering partner is an incorporated body not having an ACN or ARBN, the ASIC will require the partner to appoint an organisation who will represent the partner. The commission also asks for mentioning the email addresses of each of the partners[7]. These email addresses are to be used for notifying the partner in case they receive requests for cancelling the business name. In case the partner is an incorporated entity they will not be required to forward nay details of the holder. In case the partner is a single individual, aspects like date and place of birth will have to be provided.

The birth details will act as proof of identity of the partner. These details will not be displayed in the public register for confidentiality purposes. The details of residential address will be used for administrative and legal enforcement purposes. Business names are essential for legal recognition and if they are absent it is mandatory[8]. Thus the following procedures should be kept in mind by the family if they intend to run the business under their chosen name.

In the present issue Hillary seeks advice as to how disputes and disagreements in regard to business decisions can be resolved. Partnership business is a convenient way of doing business. Since there are already four heads in the business it has a better prospect compared to sole proprietorship business. These kinds of collaborations are present in many kinds of businesses. This structure is usually followed in case firms and start-ups delivering professional services. It is true however that disputes and disagreements in relation to business decision making and they are problematic in nature[9]. Such issues may impact the personal relationships of the partners. Thus there are ways by which disputes in a partnership business can be avoided. For that the partners should put in time, money, effort and patience throughout the process of dispute resolution. Thus certain ways can be followed by which disputes can be resolved and the partnership will not be damaged.

Registering a Business Name with ASIC

Initially the family should make sure that a written or typed partnership deed is made. The agreement in such cases can be either operating agreement or partnership agreement. This will depend on the nature of business they are carrying. Certain aspects should be clearly mentioned within the partnership deed or agreement. There should be mention of the people who are controlling the business and their degree of control. The role and job of each partner should be mentioned. The duties and obligations of each partner should also be clearly mentioned. The capital contributions of the partners should be mentioned as well the nature of the contributions. In case additional capital inflow is required, the method of utilising them should be included in the agreement. The compensations should be decided upon and how they will be distributed should be mentioned[10]. The agreement will contain the policies and procedures that will be adopted by the business and used for decision making. There should also be mention of contingent and emergency situations. This may include cases of conflicts, situations where a partner can withdraw from the business, removal of the partners and co founders etc. Provisions will also have to be made as to change in the percentage of ownership when existing partners or new partners bring in more money to the business. The partners have to determine the circumstances under which the partnership relationship or the business can be terminated and ended[11]. Disputes usually arise in partnership businesses when the agreements do not contain clear information and is unable to provide the correct guidance to the partners. This creates more confusion and conflict. Hence it is important that maximum details and information is provided within the agreement. The agreement will provide procedures in case complex issues arise regarding dispute resolution. Conversations and negotiations are very helpful methods of resolving disputes. In case disputes and disagreements arise the family members should decide upon a specific time for discussions. It is not necessary that the discussions are made during the work as it would become unproductive and cumbersome for the business.

In the present case scenario the issue is a complex one. The daughter of the couple takes the initiative of executing a plan with for converting the family kitchen according to an industrial layout. The purpose was to cater to more number of customers. The kitchen appliances of industrial nature were ordered from Appliance City in the name of ‘The Happy Hills’. The deal was lucrative for the hotel business as they were allowed a healthy discount. However the problem or issue arose when the seller tried to cancel the contract on the ground that the business does not have any existence. The manager of Appliance City claimed that the contract was void due to the non existence of the business.

Thus, in order to enforce the contract they have to prove certain things to the seller i.e. Appliance City. As per law it is important for any business to register their business name in Australia. This would enable the partnership firm or business to trade under the business name. The registration of business name will enable the potential customers to have a valid and meaningful connection with the brand and the business. A business name will also help the establishment to be differentiated from the competitors[12]. On registering the business, the application of the registration will be across Australia and will not be restricted to the state only. When the business name gets registered, transparency increases. The customers are facilitated to access the information regarding the identity of the people who are running the business. It is important for the family to check with the ASIC to make sure that their business name is not registered by some other person[13]. It is also essential that they should contact IP Australia to make sure that the business name does not have any registration under a trademark or other intellectual property. If the trademark exists and the family still continues to use the business name they may be sued for infringing the trademark. It is also important that a written partnership agreement is made[14]. The agreement should be registered. The agreement will give them the right to register the proposed business name. The registration of the business name is to be made with the Australian Securities and Investments Commission (ASIC). Before doing so, the family has to apply for an Australian Business Name at the Australian Taxation Office (ATO). The registration of the business name will be valid for a period of one to three years. For continuing the use of the name the registration must be renewed by the end of the period. Business names if not registered and if reported by a third party can attract penalty as per law to the tune of $ 5100.

Thus if all these aspects can be proved by the family they will be able to enforce the contract. If these details cannot be proved the other party has the right to cancel the contract.

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