Reference no: EM131266

Read the 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 recently opened a bakery (Bio Breads) at their university. Liam, Nisha, Saul and Jing have entered a written agreement with the university that enables them to use the university cafeteria ovens overnight to bake bread which is then sold from a stall located within the university's food court.

Only certified biodynamic or organic grains and ingredients are used in the many different Bio Bread loaves, and on the rare occasion ingredients are sourced from overseas, the Bio Bread operators, Liam, Nisha Saul and Jing, ensure only fair trade certified products are purchased. The operators all strongly believe that only sustainable agricultural practices should be encouraged and that grain growers and other suppliers should be paid a fair price for their labour. In addition to these shared beliefs, Liam, Nisha, Saul and Jing do not 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 a fair price should be paid for labour Liam, Nisha, Saul and Jing believe they also should receive a reasonable financial return for their labour as bakers and operators of the Bio Breads business. While prices are kept as low as possible at the bakery, the large volume of sales means that Bio Breads is a profitable operation. The operators choose to share the profits equally between themselves.

Liam, Nisha, Saul and Jing are, however, 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 should be a place where all who wish 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 because 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 appropriate given the specific circumstances described above.

• Partnership
• Co-operative 
• Company

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 need to do some research before you can give them your opinion.

Required: Complete the tasks in Part A and Part B. 
 
Part A                                                                           
 
Compare the essential characteristics of partnerships, co-operatives and companies 'the business structures'.

In your answer you must discuss:

-  the respective advantages and disadvantages of each of these business structures

-  the steps required in forming a partnership, a co-operative and a company - and how each business structure can be ended

-  further structural options within each of the business structures (eg provided certain requirements are met a partnership may be a general partnership or a limited partnership)

-  how capital may 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.
 
Part B                      

Based on your comparison in Part A, advise Liam, Nisha, Saul and Jing which business structure is most appropriate given the specific circumstances of the Bio Breads operations as set out above. In your answer you must give reasons for your advice.

Illustrate why neither of the other two business structures are, in your opinion, the most appropriate.