Julio, Carolyn and Trisha after studying at La Trobe University decide to go into business together called Finance R’Us,to provide different types of financial advice to their clients. Julio specializes in tax advice, Carolyn has a passion for accounting and Trisha knows the ‘ins and outs’ of investment.
In order to save money, they decide to keep it simple and just write down some rules of their agreement on a serviette: put equal money into the business, to share the profits equally, and everyone will be involved in the management of the business.
Still they are a bit short on money so Julio’s sister, Sarah, provides a loan of $40,000 for which she will receive 2% of the net profit over 5 years. She is only interested in helping her brother and his friends out, and not interested in the business.
1) Under what type of business structure is this business running? Furthermore look at everyone who might be involved in this business, i.e. Julio, Carolyn, Trisha and Sarah and discuss their status in regards to the business. Give reasons.
Julio advises a client, X, in writing on the tax implications of the purchase of a certain real estate property. Unfortunately, Julio made a mistake in his advice as he was not on aware of the latest ruling by the Australian Tax Office (ATO). Because of this error, X had to pay an extra $15,000 in tax because the advice was incorrect.
2) Discuss whether Julio and/or his business partners are liable for the damages suffered by X? Please make sure that you only assess the legal risks under contract. Support by citing relevant cases and statutes.
Without the knowledge or permission of Julio, X had passed on the written tax advice to his best friend Y. Based on the advice, Y decided to purchase a property as well. Naturally Y had to pay an extra $15,000 in tax.
3) Discuss whether Julio and/or his business partners are liable for the damages suffered by Y? Please make sure that you only assess the legal risks under tort of negligent misrepresentation. support by citing relevant cases and statutes.
In order to manage their business risks better, Julio, Carolyn and Trisha want to make changes to how they are operating their business.
4) What are their options? Think about whether they
• can change something in their procedure when giving written advice;
• can make their responsibilities clearer; or
• have to change their business structure.
Give reasons for your answer; in particular support your answer by citing relevant cases and statutes.