1. Legal Forms of Business
Your friends Monica and Rachel have approached you with a business idea. They want to open three beauty salons in Adelaide. They have identified the shopping centres where the three salons will be opened. They invite you to a meeting where they present you with a business plan.
They will manage a salon each and their friend Phoebe will manage the third salon. Phoebe does not want to be involved in the business in any way apart from managing a salon.
They ask if you would be interested in investing in the business and they are seeking $150,000 from you. Monica and Rachel each have $50,000 invest. The total invest from all of you will be $250,000.
Monica and Rachel have not done anything further about setting up the business and were waiting until they discuss it with you. They want to call the salons “Friends Essential Beauty”.
a. What business set up would best suit “Friends Essential Beauty” and how would you protect your investment in the business?
b. What are the advantages and disadvantages of your choice of business set up.
c. How would you ensure the name “Friends Essential Beauty” is available and what does it cost to register the name?
2. Employment and Business Obligations
You have now opened the 3 salons and they have been operating for 3 months. Monica, Rachel and Phoebe are managing the salons and there is a total of 10 permanent staff members.
You have had a few issues with Phoebe’s salon
Two full time beauticians – Mary and Kate
Casual beautician – Ursula - She is Phoebe’s identical twin sister
a) Mary – Full time beautician
Mary has upset a customer by using the wrong product and the customer had a rash all over her. You had advised Mary that she should not use this product but she is a rep for it and thinks it is great. You agree with Monica and Rachel that you want to terminate Mary’s employment.
Can you terminate her employment without any consequences?
b) Kate – Full time beauticianKate keeps turning up to work dressed in black (Goth clothing), with an increasing number of tattoos and piercings. You do not feel this is appropriate and want her to stop wearing Goth clothing and remove some of the earrings on her face.
Can you tell Kate what to wear to work?
3. Dealing with Customers & Competitors
a. Ursula & Phoebe
Monica and Rachel attend the “Beauty and Hair Convention” at the Adelaide Convention Centre. They have a stand to promote their “Friends Moisturiser”. They have a banner with “Friends Essential Beauty” behind the table. The Convention is to last three days Saturday/Sunday and Monday. On the stand next to you are Ross and Joey who are manning a marketing stand promoting
neon signs for salons. During the convention Phoebe and Ursula have visited the stand a number of times and covered the lunch breaks on Saturday and Sunday. Ursula is going to manage the stand on the Monday.
On the Monday Ursula is managing the stand and gets into conversation with Joey. Joey says to Ursula “I have a great business deal for you. I know you have all set up “Friends Essential Beauty” and I think we can do a deal on three neon signs”. “You can buy three signs for $30,000, a saving of $15,000.” Ursula thinks it is a great idea and rings Phoebe who also agrees with her. Ursula tells
Joey we would love to buy them. Ursula and Joey sign an agreement for $30,000 to be paid when Joey delivers the signs the next weekend. Under Ursula’s signature are the words “Phoebe Boufatt, Manager of Friends Essential Beauty. Ursula does not point out the error.
The next day Phoebe meets with you, Monica and Rachel and tells you of the agreement to purchase the neon signs. Monica and Rachel are very upset and state that Phoebe nor Ursula had no authority to purchase something that expensive. “We cannot afford it,” they tell her. You all agree you will not pay for the signs.
Using relevant legal principles, explain who is liable for the payment of the signs – is it Friends Essential Beauty, Phoebe or Ursula?
The ACCC has written to you about a few complaints they have received. Please prepare for Monica and Rachel an explanation for each point based on legal principles about the issues raised.
b) You advertise that “a contribution from every beauty treatment goes to charity” but, in fact, there is no record of any such collection being made nor sent.
c) You advertise that your “Friends Moisturiser” is made from all natural products but in fact about 20% of the product is artificial food colouring that has been used to give it the unique Friends colour.
c) Essential Beauty is an already established beauty salon with a large number of salons in Adelaide. They believe you are misleading consumers by havinge a name similar to theirs.
1. a) In the present case, the suitable structure for business is company because this form of business can be adopted at the time of starting or growing the business. Company is completely different from sole trader or partnership structure, and it is separate legal entity which means it is different from its members. In other words, company is imposed with the similar rights as any natural person has such as company can incur debt, sue and be sued. Company’s owner has option to limit their liability, which means that they are not personally liable for the debts of the company (Australian Government, 2017). As stated above company has separate legal entity and the best advantage of the company is limited liability of members. In other words, members of the company are not liable for the debts of the company. Investment made in this form of business is secured because if things go wrong then in some cases directors are also liable (ASIC, n.d.).
b) Following are the advantages and disadvantages of company:
- Company has separate legal entity, and liabilities of owners are limited in this form of structure.
- This form of structure is complex as compared to others, and set up cost of company is high.
c) Business name “Friends Essential Beauty” can be registered through the ASIC website and cost for registering business name is $34 for 1 year and $ 80 for three years (ASIC, n.d.).
2. a) Issue:
Whether employment of Marry can be terminated by employer without consequence?
When employment of employee ends with the present employer then it is known as termination of employment. However, it must be noted that employment’s end for various reasons. An employee can be resigned or can be fired. It is important to follow the rules related to termination for avoiding any future consequences such as dismissal of employee, notice, and final pay.
Employer must give proper notice to the employee before terminating the employment and also settle the final payment of employee. Some rules are framed by commonwealth for fair termination of employment and if employer does not follow these rules then it is considered as unfair or unlawful employment. Before terminating the employment employer must consider the entitlements owned by employee and employer must have valid reason for dismissal (Fair Work ombudsman, 2017).
In the present case, Mary is the employee and it is necessary that employer give proper notice to the Mary before terminating her and also settling her final payment. Therefore, employment of Mary can be terminated but after following proper rules for avoiding the future consequences, because in this case mistake is of marry that use wrong product and upset customer.
Yes Mary can be terminated without consequences.
Can Kate can be directed what to wear at work?
Employers has power to set the rules related to dress code of employee at the workplace, but it must be ensured by employer that dress code set by him does not amount to any discrimination because any type of discrimination at workplace is against the law and it can treated as unfair practices. Therefore, employer must ensure while stating the dress code r he does not create any discrimination (Workplace fairness, 2017).
Rules related to dresses are discriminatory in nature if they are hitting some single employee with different treatment because of their culture or background. There are number of employers who want their employees to follow dress code. Employers have power to regulate the clothing, piercings, tattoos, makeup, nails, hair, and more. Therefore, it is legal to set dress code but it must not be discriminatory (AHRC,2017).
In the present case, employers can set the dress code for employees up to that extent that it will not be considered as discrimination at the workplace with the employees, and in this case also employers can set dress code for Kate but they must ensure that such dress code is followed by all employees and it does not results in any discrimination.
Yes, it is necessary for Kate to follow the dress code.
3. a) Issue:
Who is liable to make the payment?
Section 198A of the Corporation Act 2001 states that business of the company is managed by or under the direction of directors and this section entrusted the directors with the power to manage the company, and directors have power to enter into an agreement on behalf of the company (Corporation Act, 2001). In other words, directors of the company can bind the company or any other person who is authorized by the directors of the company. Any person who is not authorized by directors has no power to make any agreement on behalf of the company (ASIC, 2017).
In the present case, Section 198A of the Act authorizes the directors to manage the company and give directions, but in this case both Phoebe and Ursula signed contract without any direction of directors. Therefore, payment shall be made by either phoebe or Ursula.
Company is not liable to make any payment.
b. i) Section 37 of Competition And Consumer Act 2010 states that business cannot make or misleading statements towards their customers, and they are not allowed to make any false impression on their customers. This rule also while making the advertisements by the company. In this case, company does not make any false impression and records related to this are present (ACCC, 2017; Competition And Consumer Act, 2010).
ii) Artificial food coloring is not harmful for human body and company use only 12% color and not 20%. Therefore, there is no false statement made by the company in the advertisement, and no false impression is made by the company on customers.
iii) Section 5A of the Business Names Registration (Availability of Names) Determination 2015 states the rules for the purpose of determining whether business name is identical or not, and after determining the rules it is clear that the name is not identical or nearly identical with the name of already existing business, and company does not show any relation of it with existing business. Therefore, there is no offence by company while registering the name (ASIC, n.d.; Business Names Registration (Availability of Names) Determination, 2015).
Australian Government, (2017). Company. Retrieved on 22nd April 2017 from: https://www.business.gov.au/Info/Plan-and-Start/Start-your-business/Business-structure/Business-structures-and-types/Company.
ASIC. Directors' liabilities when things go wrong. Retrieved on 22nd April 2017 from: https://asic.gov.au/for-business/your-business/tools-and-resources-for-business-names-and-companies/asic-guide-for-small-business-directors/directors-liabilities-when-things-go-wrong/.
ASIC. Business name fees and payment methods. Retrieved on 22nd April 2017 from: https://asic.gov.au/for-business/payments-fees-and-invoices/payment-options/business-name-fees-and-payment-methods/#BNfees.
Fair Work ombudsman. Ending employment. Retrieved on 22nd April 2017 from: https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/ending-employment.
Workplace Fairness. Dress Codes and Grooming. Retrieved on 22nd April 2017 from: https://www.workplacefairness.org/grooming-codes.
ASIC. Directors - What are my duties as a director. Retrieved on 22nd April 2017 from: https://asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/directors-what-are-my-duties-as-a-director/.
AHRC. Dress Code. Retrieved on 22nd April 2017 from: https://www.humanrights.gov.au/quick-guide/12031.
ASIC. Disputes about similar business names. Retrieved on 22nd April 2017 from: https://asic.gov.au/about-asic/contact-us/how-to-complain/disputes-about-similar-business-names/.
ACCC. False or misleading claims. Retrieved on 22nd April 2017 from: https://www.accc.gov.au/consumers/misleading-claims-advertising/false-or-misleading-claims#creating-a-false-or-misleading-impression.
Business Names Registration (Availability of Names) Determination 2015- Sect 5A.
Corporation Act 2001- Sect 198A.
Competition and Consumer Act, 2010-Sect 37.
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