Another course that I completed in Cert IV: Accounting and Bookkeeping is Make decisions in a legal context.
The unit concerns about legality of a business. It teaches me about business structures, different kind of laws that apply to business such as employment law, property law, consumer law, etc.
It helps me for structuring my side business, as well as heading to the right direction in terms of keeping the business safe.
The Australian Legal system
Split into 2 types, Legislation and Common Law, there are 2 sets of laws that define the Legal system.
- Legislation: bills passed from the Parliament, and are enforced throughout Australia.
- Common Law: made by Court when there is no relevant law for the case being heard.
Categories of Law:
- Criminal Law: protects the society from wrong actions.
- Civil Law: govern private dealings between individuals, e.g. Contract Law, Tort Law and Property Law.
I learned about Negligence a bit deeper than other areas of the law. Basically it is a neglect of the duty of care when it results in recorded damage of another individual.
Also there is mentions about Victorian Civil and Administrative Tribunal (VCAT), which I’m sure I’ll be touching base with them at some point. They are where we go when there are problems with tenants.
Australian Business structures
There are quite a few business structures that one can consider when deciding to go on a business venture
- Sole trader:
- probably the most common type of business out there. It allows an individual to conduct small business transactions and/or collect/pay GST.
- Can have employees, and operate as a proper business.
- The bad thing is that all personal assets are exposed to the public. If something bad happens to the business, e.g. bankruptcy, the owner may need to fork out his/her own assets to remedy the damage.
- Partnership: similar to Sole trader, however the structure involves multiple people in the business.
- Can be either public or private company. This is the most common structure for companies out there.
- Can officially raise funds from investors.
- Proper structure around taxes, and the tax rate is fixed at 30%.
- Joint ventures
- Similar to partnership, however, this business structure has a limited time.
- 2 or more individuals/businesses join together to complete a project, and when the terms are satisfied, the joint venture is over.
- A franchisee is an individual that creates a business that operates under an existing system that a franchisor setup.
- May be easier than creating an individual business, since the system and branding is already done by franchisor.
- Limitation on how to operate, develop new products
- Good tool to protect family/individual assets.
- Good tool to reduce income taxes paying to the government.
- Multiple types of trusts that need to be thoroughly researched before creating one.
- Operating not-for-profit, whose members have decided to give their organisation a formal legal structure.
- Must have “Incorporated” or “Inc.” after its name.
- Is a legal entity so an Association is exposed to all laws.
- Democratic structure
- Traditionally based on values of self-help, self-responsibility, etc.
There are 2 types of contracts
- Contract of service:
- signed between employer and an employee, contains all benefits, terms, wage amount, service description.
- employer may be vicariously liable for employee’s actions.
- employer must provide benefits to employees, such as super contribution, annual leave, sick leave, etc.
- Contract for service:
- signed between employer and a private contractor, which contains all terms and conditions regarding a particular piece of work.
- employer is not liable to contractor’s work.
- employer does not need to provide benefits for contractor, unless specified in the contract.
This is not limited to real estate assets. “Property” is the right of ownership.
- Land, not just the soil, but anything growing on the land; and fixtures on the land, e.g. house, building, etc.
- Title to land is a person’s right of ownership of the land (it is the title that we transfer when we buy/sell properties)
- Adverse possession: this is very interesting, if someone occupies a piece of land for over 15 years without any dispute, they may be able to claim possession of the land.
- Choses(things) in possession: something that is tangible, e.g. clothes, equipment, car, etc.
- Choses(things) in action: something that is intangible, e.g. company shares, intellectual property, etc.
This area was totally new to me. So it was interesting to learn about. There are lots of things to consider when creating a company, as well as knowing about things like adverse possession really opens my eye on property law.
By Tuan Nguyen