Read fact situation below and complete the tasks in Part A and Part B.
Liam, Nisha, Saul and Jing are first year university students who have newly opened a bakery (Bio Breads) at their university. Liam, Nisha, Saul and Jing have entered the written agreement with university which enables them to use university cafeteria ovens overnight to bake bread which is then sold from the stall located within a university’s food court.
Only certified biodynamic or organic grains and ingredients are used in many various Bio Bread loaves, and on rare occasion ingredients are sourced from overseas, the Bio Bread operators, Liam, Nisha Saul and Jing, make sure only fair trade certified products are purchased. Operators all strongly believe that only sustainable agricultural practices must be encouraged and that grain growers and other suppliers must be paid a fair price for their labour. Additionally to these shared beliefs, Liam, Nisha, Saul and Jing don’t approve of large multinational corporations – preferring smaller business structures and the concept of buying from local suppliers wherever possible.
In keeping with their beliefs that fair price must be paid for labour Liam, Nisha, Saul and Jing believe they also must receive the reasonable financial return for their labour as bakers and operators of the Bio Breads business. While prices are kept as low as possible at a bakery, large volume of sales means that Bio Breads is a profitable operation. The operators select to share the profits equally between themselves.
Liam, Nisha, Saul and Jing are, though, finding it difficult to keep up with demand and often have to turn customers away. This is very much against their beliefs that Bio Breads must be a place where all who desire to purchase reasonably priced biodynamic, organic or fair trade food are welcomed. Liam, Nisha, Saul and Jing are also struggling to keep up with their studies since they are spending so much time running the bakery.
Liam, Nisha, Saul and Jing approach you for some advice. In particular, they are seeking your opinion about which of the following ways of organising the business is most suitable given the specific circumstances describeed above.
While you are familiar with some of the characteristics of partnerships and companies you have less knowledge about co-operatives, so you inform Liam, Nisha, Saul and Jing that you require to do some research before you could give them your opinion.
Required: Complete the tasks in Part A and Part B.
Compare essential characteristics of partnerships, co-operatives and companies ‘the business structures’.
In your answer you must discuss:
• respective advantages and disadvantages of each of these business structures
• steps required in forming a partnership, a co-operative and a company – and how each business structure could be ended
• further structural options within each of the business structures (eg provided certain requirements are met a partnership might be the general partnership or a limited partnership)
• how capital might be raised, and any restrictions on capital raising for each business structure
• the regulatory environment for each business structure (is there a specific regulator? Does specific legislation apply to that structure? If so, is it state, commonwealth or a combination of both?)
• internal management and governance requirements for each business structure.
Limit your comparison to partnerships, co-operatives and companies – and structures within these. Don’t describe sole traders, joint ventures, franchises, associations. And ensure you use the correct state based legislation for your location.
Based on your comparison in Part A, advise Liam, Nisha, Saul and Jing which business structure is most suitable given the specific circumstances of the Bio Breads operations as set out above. In your answer you should give reasons for your advice.
You should also describe why neither of the other two business structures are, in your opinion, the most suitable.