Question

Background facts: Mary, Elizabeth and Bill run a business which sells imported European groceries online and at its bricks and mortar store in Melbourne. The business has an annual turnover of $6,000,000 and 30 employees, and profits of the business are shared between Mary, Elizabeth and Bill. Mary, Elizabeth and Bill would like to expand their business by importing new groceries from Asia and buying another store in the Docklands which they hear is running at a loss. They do not want to take out a loan from a bank or bring in any new people into the business.

Question 1(a) [5 marks] What business structure are Mary, Elizabeth and Bill currently using? Explain your answer. You may assume that the business structure has not been registered with the government and that property is owned personally.

Answer 1

Ans. Mary, Elizabeth and Bill are using partnership as business structure to carry on there business. Under this structure partners share profits and losses in agreed profit sharing ratio. In absence of any information in partnership deed, profit sharing ratio among partners is equally. Besides this structure also does not require any registration with government authorities, it only requires partnership agreement between partners which is also known as partnership deed. Property owned by partners can also be used in business or property can also be registered in name of partnership. So, assumptions given for above business structure also holds good. Based on above discussion we can say that above business structure is partnership.