Part A: Contracts Law Question
Joey Joystick is a computer programmer. While he was in his final year of university studies, he worked as an intern with a local electronic games producer, Great Games Pty Ltd. Joey impressed his supervisors with his insightful comments and other input on design work. They were so impressed with his work on one design, Crypt Force, that they gave him part of the credit for it and paid him a general bonus for it. Crypt Force ultimately won an industry award and proved to be a big seller for the company.
After Joey’s university graduation ceremony, he was ushered aside by a Great Games executive who showed him a document and said:
“We’re very impressed by your work, Joey. We’d like you to join us permanently—we’re sure you’ll be happy with the deal we can offer you.”
The document was a contract of employment which contained the following clauses:
1. The duration of the contract is three (3) years.
9. The employee (Joey) agrees that he will not for the duration of the employment contract or for a period of one year after the conclusion of the employment undertake design activities in Australia for the purposes of the production of electronic games or any other form of entertainment.
The starting salary under the contract was that normally paid to a senior designer, which was a position a new designer would not usually attain until he or she had worked with Great Games for three years. Joey happily signed the agreement.
After two years with Great Games, Joey was approached by a film production company, Computer Animated Films Inc (CAN). Joey agreed with CAN that, for a salary five times what he was getting paid by Great Games, he would immediately start work as part of a team producing Cosmic Armada, a feature-length computer animated film. As part of the deal, Joey would also work on a spin-off Cosmic Armada electronic game.
Advise Great Games whether it can prevent Joey from working for CAN.
Part B: Business Structures question
You have graduated from Holmes Institute with a Master’s Degree in Professional Accounting, and you’re employed as an accountant/financial advisor, for an accounting firm called Big Business Accountants.
Harry is a client, and he has made an appointment to see you. Harry is keen in starting a business. This business he is proposing to start is a bakery. Harry has qualifications in bakery which include making cakes, bread, and pastries.
Harry, has saved up his money and he has about $50,000.00 in cash. He hasn’t bought any equipment, but he has found a shop which he is considering leasing where his bakery business will be operating from.
Harry has always been an employee and now he would like to know what type of business structure he should have for his bakery.
Your task is to write a report to Harry about the types of business structures that you consider would be suitable for Harry to consider.
Part A: Contracts Law Question
Issue
Joey Joystick is a competent and talented programmer. He has worked as an intern in the local electric game producer, great games Pyt Ltd. He showed incredible design skills in this company, and the company gave him a general bonus. He was in the limelight due to one of his designs called Crypto. After getting a job from the company, which was based on a three-year contract, Joey had to avoid leaving the company or working on any other project. In the first two years, it was all right. However, film production company Computer Animated Films INS offered a handsome amount to Joy to work on its project. The problem or issue is in the spotlight, as he intended to utilize this golden opportunity by working on their project. There is one year remaining in the current job contract. If Joey decides to leave the company, he will break the law along with the backup support by CAN. It seems a tough decision for joy, as he should complete his contract with the current company, as it provided opportunity even when he was under graduation. On the other hand, it was a golden project, as he never wanted to miss it. Thus, leaving the current organization can hit the company hard. Preventing Joey from working for CAN is a big challenge, as currently, the company management cannot provide the same salary and benefits. If Joy intends to appeal for an increase in the pay or benefits, it could create a new deadlock between him and the company. Joey is bound to follow the terms and conditions in the contract, as he may also face legal consequences later in his career. Joey always intends to sustain a good relationship with the company. However, if he converts, it can also impair the relationship and brand image (Kwiatkowski & Wlodarczyk, 2014).
Rule
Regarding this particular case study, the most appropriate law, which can be applied, is the fair work act of Australia. It is critical legislation, which enables both employers and employees to work under settled terms and conditions. This law is based on workplace surveillance and anti-discrimination. However, the pertinent section to this case study is workplace surveillance, as the organization has to pay close attention or observe the workplace and employee behavior. The employee and employer relations must be retained according to this rule of law. Regarding workplace surveillance in the company, the company management must observe the behavior of Joey and his willingness to work to complete the contract. On the other hand, this law also applies to Joey, as he has to sustain his relationship with the company by completing his contract, any breach of contract by joining a new company can impair the relationship, and it may result in severe legal consequences (Freyens & Oslington, 2013). On the other hand, another rule, law, or principle in Australian contract law. According to this law, both parties, such as employees and employers, must be linked with five elements. These five elements in the formation are agreement, consideration, capacity, intention, and certainty. Joey and Great Games Pty Ltd contained the agreement in the form of an employment contract for three years. The consideration depicts some offers, benefits, and salaries against the services of Joey. Both parties were bound by legal relations, as they were intending to entre in legal relations. Both parties, such as Joey and Great Games Pty Ltd, wanted to complete the contract. Thus, if Joey wants to move to another company before completion of the contract, both the fair work act and Australia contract law will be violated. These violations will lead to some legal consequences, which can create an impact on a career (Spencer, 2015).
Analysis
The fair work act 2009 is in the limelight when it comes to the employment contract or agreement between Joey and the gaming company. Joey was bound by the company that he would not take any part in designing activities in or out of Australia during the three-year contract. Thus, with the perspective of the employee, Joey had to complete these contracts. Of course, he has to be fair with his job and the company to build a long-term relationship. The best thing that he can do is to complete the contract or wait for a while to find more opportunities. On the other hand, the firm can also depict fair work practices that may restrain Joey from moving forward. First, the company can avoid all these practices or activities, which can decrease motivation and willingness. Flexible work conditions, no discrimination, and attractive benefits can work in a better way. The most important thing for the company is to enable social inclusion for this employee, and it can increase his willingness to work for the company (Freyens & Oslington, 2013). Australian contract law restrains Joey from breaching the contract. No doubt, the new company is offering incredible benefits as compared to the current company. However, Joey and the current company have entered into the legal relation, as any breach can result in a conflict of interest. The violation of the contract can increase the cost of the company. On the other hand, Joey has to face legal consequences, as the company can sue him for several damages. Thus, it can be said that laws or rules are applied to both parties, and the third party, which is a new organization, has to understudy it as well. Computer Animated Films Inc must think on what basis it offers maximum benefits to Joey even though he has to complete his contract in the current company (Spencer, 2015).
Conclusion
When advising great games to prevent Joey from working for other companies, there is a need to look at different opportunities. For instance, the first thing that the company can do is to revisit the agreement or contract. Joey and great game have to revise the agreement to remember their legal relationships. However, at the organizational level, the company can offer attractive or competitive incentives to Joey after two years or an agreement or contract. Fair work act 2009 in Australia compels the company to provide equal opportunities to Joey, and it can restrain him from working for CAN. The Australia contract law must be communicated to Joey as well, as he must be aware of legal consequences after leaving the organization.
Part B: Business Structures Question
Starting a new business is always a big challenge. It is a fact that any business owner has to consider some opportunities or possibilities to get things in favor. Starting a bakery business with a limited amount of capital is a good idea, especially when an individual has adequate bakery experience. It has to predict how a particular structure can help the business grow and sustain in the long run. As a business consultant, I have to illustrate some key business structures, and the company management has to derive one particular structure from it.
One of the most common types of business structure is sole proprietorship. In this type of business structure, the business is always owned and controlled by one person. Harry got the opportunity to contain this type of bus structure, as he has adequate capital and bakery experience. Being an accounting and business expert, I can suggest this type of structure if the harry is looking to control his business thoroughly. In this particular structure, Harry has to include both personal income and business expenses on the personal tax return. It is a fact that liabilities, debts, and losses are on account of harry. However, on the other hand, he can also enjoy the whole profitability. According to the corporation act 2001, determining the personal circumstance of the owner or businessman is imperative to form a sole proprietorship structure (Batten & Pearson, 2013).
Another option regarding the business structure that I can suggest to harry is a partnership. It can be a general partnership or limited partnership, as it depends on the preferences of Harry. The general partnership can be a good option for the company or harry, as two or more people operate it. Both partners have to share business responsibility and returns. I prefer this structure or type of structure because it can help to share the risk burden. In the limited partnership, harry can collaborate with some of the other partners who can only invest. Harry will only have the right to make business decisions. Another structure of the type of structure for the bakery business is a corporation, as it is an independent legal entity. However, it is to mention for harry that the corporation is always a complicated structure, as it is associated with multiple shareholders along with the promising returns and value for them. It is a fact that the corporation or this type of structure always needs extensive reporting and recording of different business activities. Harry may have to be a more legally responsible person when dealing with the bakery business as a corporation. For instance, it can be said that the corporation is always associated with complicated business regulations and tax requirements. Another business structure for Harry’s business is S corporation. In this particular business structure, it has been realized that profit and loss are passed through personal income. In this particular business structure, Harry cannot have more than 100 shareholders. Of course, it is not a good option for Harry, as he has to start the bakery on a small scale. The Australian and Securities and Investment Commission has made some partnership business interventions, as customer-focused benefits must be streamlined. These benefits can be in the form of affordable, efficient, and innovative outcomes (Crabb, 2017)
One of the best options for Harry’s business is to contain a limited liability company, as it can carry advantages or benefits of the structures mentioned above. It is an excellent opportunity for Harry to start a bakery business with a reasonable scale and avoid double taxation. Interestingly, it is to mention that Harry will not be liable for all business (Asic.gov.au, 2020).
Thus, with a capital of $50,000.00 in cash, harry must consider several factors when selecting the adequate business structure. When selecting or adopting the business structure, these factors or elements are taxes, liabilities, cost, flexibility, future needs, and legal complications. Of course, Harry will choose the business structure, which is less costly and complicated. However, before making the final call for Harry and his bakery business, some more insights regarding the structure are to be elaborated along with some key insights. For instance, if Harry has to decide at his end, he has to choose sole proprietorship structure, sole proprietorship structure can also be referred as a centralized structure, as the owner cannot involve any other stakeholders in the decision-making process
On the other hand, in the decentralized structure, the owner or harry involves different stakeholders in the decision-making process. In short, it can be said that the decision-making process can be delegated by the company management to enhance the visibility of the bakery business outcomes in the end.
When considering leasing, where his bakery business will be operating from, I can suggest partnership as a preferred business structure. Harry wants to keep it simple, and of course, the partnership is less formal, along with the limited legal obligation. The bakery he is looking to lease may contain more than he has in hand in the form of capital. Thus, it seems pertinent for him to share the burden and risk by forming a partnership. The best way that harry can do in the partnership business is to share knowledge, skills, and experiences. Apart from his bakery experience, he will be in a better position to know more about the market, production, and customers. Partnering up with a person who is also involved in a bakery business is a good idea, as a collaborative approach can be used to run the business smoothly. In the decentralized structure, Harry and his partner can make better and effective business decisions. It can be asserted that better decision making is one of the prominent advantages of this type of business structure. It looks fair for harry to hold limited ownership and control, and it is all about sharing the burden and risk in the competitive landscape. Even if harry intends to expand the business and make it a chain, the business control will be less complicated (Abr.gov.au, 2018).
Consequently, depending on the needs and intentions of Harry or his bakery business, an appropriate structure has been selected. The accounting and business background has helped me to illustrate some possibilities for harry. However, based on the needs and demands of the business, the final decision has been depicted.
References
Abr.gov.au, 2018. Partnership. [Online] Available at: https://www.abr.gov.au/business-super-funds-charities/applying-abn/abn-entitlement/partnership [Accessed 22 May 2020].
Asic.gov.au, 2020. Steps to register a company. [Online] Available at: https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company/ [Accessed 22 May 2020].
Batten, R. & Pearson, G., 2013. Financial Advice in Australia: Principles to Proscription; Managing to Banning. St. John’s Law Review, 87(2/3), pp.511-59.
Crabb, J., 2017. ASIC commissioner: fintech streamlines bank back offices. International Financial Law Review, 1(1), pp.1-3.
Freyens, B.P. & Oslington, P., 2013. A First Look at Incidence and Outcomes of Unfair Dismissal Claims under Fair Work, WorkChoices and the Workplace Relations Act. Australian Journal of Labour Economics, 16(2), pp.295-306.
Kwiatkowski, E. & Wlodarczyk, P., 2014. Importance of Employment Protection and Types of Employment Contracts for Elasticity of Employment in the OECD Countries. Comparative Economic Research; Lódz, 17(1), pp.21-44.
Spencer, E.C., 2015. Revising the Role of Contract in Development Cooperation. Law and Development Review, 8(1), pp.147-86.
