Introduction

Select the right legal structure is a critical decision for any entrepreneurs since it significantly
determines the success of a business. Warwick and Sunny are also considering the appropriate
ownership structure to together establish a college. Hence, this essay aims to counsel them on
the best structure for their business operation in the education industry.

Discussion
Based on current conditions and expectations of Warwick and Sunny, the optimum choice of
business structure for their college is company and specifically, a proprietary limited company.
Particularly, the decision is derived from a comprehensive consideration of four matters which
are liability protection, tax implication, degree of control, and nature of the business.

Firstly, a major advantage of incorporating a business over other structures is the limited
liability of owners as stated in Corporations Act 2010 (Ciro et al, 2014). A company is regarded
as a distinct legal entity from the owners, with its own rights, obligations and liabilities
(Latimer, 2016). Thereby, shareholders are quarantined from any legal claims against the
business, as well as their personal assets remain unscathed from recovery by the company's
creditors (Latimer, 2016). As Sunny and Warwick long for a low-risk solution, opting for the
structure of company deem appropriate.

Secondly, the structure of a company might bring a tax advantage for Warwick and Sunny's
college. The fixed company tax rate is 30% and 27.5% for entities whose total turnover
threshold are under $50 million (Australian Taxation Office, 2019a). Although a company is
not entitled to receive a tax-free threshold of $18000 (Australian Government, 2019a), the
corporate tax rate is still more favourable for Sunny and Warwick concerning the future
viability of their business. Particularly, their college business is operated in the education and
training industry, a thriving sector of Australia which contributed $130.9bn to the nation’s GDP
in 2019 (IBISWorld, 2019). Hence, Warwick and Sunny's college income would probably be
higher than the amount for the minimum marginal tax rate. Additionally, the average income
for a small business owner in Australia is $73,000 which is subjected to an individual income
rate of 32.5% (Australian Taxation Office, 2019b).

Thirdly, the company structure is among a handful of entity types which is eligible to establish
a non-government school. According to section 88 (6a) of Education Act 2004 (ACT) and
section 46 of Education Act 1990 (NSW), the applicant who intends to set up private schools
must be the proprietor of a corporation. Therefore, Warwick and Sunny should register a
company which falls under the category of the corporation (James, 2017) to qualify for the
college establishment.
Lastly, the proprietary limited company brings a greater degree of control for business owners
than other types of company. Typically, public companies have a separation between the
owners and directors (Ciro et al, 2014). However, the case of the private limited company
enables a person to occupy the position of both shareholders and directors (Circo et al, 2014).
Thus, Sunny and Warwick could control the day-to-day management of their entity in their
own way and also eliminate agency problems (Paterson, 2016). Moreover, if Warick trusts
Sunny, he can grant Sunny to be the director of their college without many concerns. Since
despite owning limited liability as a shareholder Sunny must comply with the obligation
imposed by Corporations Act 2001 (ASIC, n.d.). Hence, if Sunny breaches her duty as a
director, she might be personally liable for the company's debts and liabilities.

In order to set up a proprietary limited company, Warwick and Sunny must lodge an online
application to register their company with ASIC as well as pay the prescribed fee of $495
(Australian Government, 2019b). After that, ASIC will register the company and issue
Australian Company Number (ACN) which constitutes of 9 digits (ibid). The company of
Warwick and Sunny would commence on the issue date of the registration certificate.
Moreover, their college must have a distinct company name which can be one chosen by them
or the ACN of the company (ibid).

Conclusion
Overall, the proprietary limited company is considered the most pertinent structure for the
intended college entrepreneurship of Warwick and Sunny. This legal structure provides them
with several benefits in terms of limited liability, tax optimisation, degree of control, and
eligibility.

References