Students MUST use the IRAC method (Issue, Rules, Application, Conclusion) to answer the following scenarios. All answers MUST be supported with relevant statute or case law authority.

Question 7. Business Entities (7 marks)

Scarlett owns "nettoyer les pattes" a small cat grooming salon she is operating from her garage. She has appointments and sees various cats from the neighbourhood and clips, cleans, and grooms then. The only things she has done, with regards to the business management, is register an ABN.

Scarlett owns her house and is concerned because, when she was at her hairdressers the other day getting a perm, her hairdresser said she would lose her house if she lost a cat.

Scarlett comes to see you as she owns her house and recently whilst cleaning a wily black cat named Terry, she almost lost the cat, as it tried to escape.

a) Explain the differences in structure between a business that is operating as a 'sole trader' and a business and operating as a company. (1.5 marks)

b) Provide one advantage and one disadvantage each for the business to operate as a 'sole trader'.(1.5 marks)

c) Provide one advantage and one disadvantage each for the business to operate as a company.(1.5 marks)

d) What business structure is Scarlett operating under currently?(1.5 marks)

e) What business structure would you advise Scarlett operate nettoyer les pattesunder?(1.5 marks)