Part A

Approach a small business owner and find out the following:

a. What is the legal structure of their business?

- Discretionary trust legal structure for an Accounting firm.

b. Why did they choose that business structure?

-  The Tax benefits mainly

c.  What factors did they consider before making the choice?

- Tax factors, legal considerations, protection against personal/family assets

d. What, in their opinion, are the legal risks involved in the type of business carried on?

- There are concerns that the business could be sued for negligence

e. What legal precautions did they put in place to protect their business and themselves against liability?

- Professional indemnity insurance - protection against being sued

- Company policies (Auditing firm): asking for letters of comfort from clients, not creating any assumptions in finishing the job; must have all the information.

- The way the Discretionary Trust is set-up, protects against personal assets if the firm is sued.

- Being in a Discretionary Trust also gives protection for the entity.

Part B

Analyse the information gathered under Part A as follows:

a. Identify legal principles studied in class that are applicable to the information gathered. 

b. What other legal precautions/protection do you think the business owner should put in place?