[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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(a) Unincorporated Joint Venture In an unincorporated joint venture, the parties usually enter into a joint venture agreement, which sets out the rights and obligations of each joint venture party. Each party is treated individually or separately for tax purposes. This enables each party to use its own preferred tax structure. The main disadvantage of a joint venture is there is often joint liability to third parties.
• the use of a branch may also cause some difficulties when dealing with third parties. For example, they may need to be satisfied as to the nature of the foreign corporation’s legal structure and the means by which it is able to bind itself to obligations in Australia; and • the annual return of a branch office must include the worldwide financial accounts of the company of which it is a branch, unless exempted by ASIC. This document is available to the public. Partnership A partnership is an arrangement between two or more entities to carry on a business together with a view to a profit. Except for certain professional partnerships, business partnerships cannot have more than 20 partners. A partnership is created by an agreement among the partners. Usually, this agreement is documented in a written partnership agreement. Partnerships are regulated by the terms of the partnership agreement (if there is one), the common law and the relevant Partnership Act which applies in the applicable state and territory. A partnership is not a separate legal entity. Therefore, each partner is jointly and severally liable for the debts of the partnership. Partners also share in the profits of the partnership. Limited partnerships can also be established in some states under specific state legislation. Limited partnerships allow some partners to limit their liability for debts. Limited partnerships are generally taxed as companies. Joint Venture A joint venture occurs when two or more parties come together in order to undertake a specific project. The joint venture arrangement can be incorporated or unincorporated.
(b) Incorporated joint venture
In an incorporated joint venture, the joint venture is conducted by a company. The company is often established for the specific joint venture, and each party is a shareholder. The shareholders usually enter into a shareholder’s agreement, which sets out the rights and responsibilities of the shareholders. The parties must also comply with the Corporations Act. Trust An Australian business may be carried on by way of a trust. Under a trust structure, the trustee (who may be an individual or more commonly a company) conducts the business and holds all income and capital on trust for the beneficiaries. The beneficiaries can be individuals, trusts or companies. The trust is created by a document called a trust deed. The trust is governed by the terms of the trust deed, Australian state or territory legislation and the common law. Trusts fall into two categories: discretionary trusts and unit trusts.
ILN Corporate Group – Establishing a Business Entity Series
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