'Best Blooms' understands the importance of having an attractive garden, and also understands that not everyone has the time and effort needed to build and maintain one.

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Executive Summary

'Best Blooms' understands the importance of having an attractive garden, and also understands that not everyone has the time and effort needed to build and maintain one. 'Best Blooms' is a nursery and offers a garden maintenance service. This service provides great convenience, considering that the large majority of the residents in the area own a house and garden. It is quite a unique service to the area also with very reasonable prices, the services range from lawn mowing to bonsai, practically anything to do with the garden.

'Best Blooms' is owned by Teresa Green and is located in Sydney's Northwest. She has 25 employees, and the business has been running successfully for 5 years. Due to the fact that they are providing an efficient & quality service, they have been in high demand and have been so successful that they are now looking to expand.

Legal Entities

A business' legal structure affects the ownership, tax structure, risks and future of that business. Choosing the legal structure that best meets the business' needs may:

* Protect owner from avoidable risks

* Help minimise your taxation liability

* Save time and minimise paperwork

* Help to avoid government regulation and unnecessary "red tape".

Business entities can be incorporated; privately and publicly owned co-operatives or unincorporated; sole traders and partnerships.

Incorporated refers to the process companies go through in order to become a separate legal entity from the owner/s. This means the business exists in its own right, its own legal entity. Regardless of what happens to the individual owners (shareholders) of the company, the business continues to operate. The business has taken on a life of its own.

An unincorporated business is a sole trader or partnership where the business entity and the owner are one and the same. When the owner dies then so too does the business entity.

The Options:

Sole Trader

Teresa Green's business is a sole trader. A sole trader is an individual who runs the business without partners or a company structure. This is the easiest and cheapest way of structuring a business. The sole trader has full control of the business including ownership of all profits and responsibility of all debts.

Partnership

A partnership involves two or more co-owners participating together in a business. A partnership requires an intention to share profits and an understanding that partners act on behalf of each other in business. Therefore a decision made by one partner automatically makes the other partner responsible also. Partners are wholly responsible for all business debts and also have full control of the business and any profits.

Company

A Proprietary Limited Company is a more complex form of business structure. It requires setting up under the Corporations Act, which states that Company Directors have legal obligations, which must be met. A business with a
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Proprietary limited company structure is considered as a separate entity from the businessperson running it so it has different profit distribution, taxation and legal responsibilities than a sole trader or partnership.

Evaluation of Legal Structure Options:

Comparison of Different Entities - Company, Partnership & Sole Trader [Fig. 1]

Area

Company

Partnership

Sole Trader

Definition/Explanation

A body or association, incorporated or not, that does not include any partnerships. A company is also a separate legal entity from its owners.

Association of persons who carry on ...

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