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LEGAL PROBLEM-SOLVING QUESTION:

Luca Harris, a rising entrepreneur in Melbourne’s tech scene, has developed cutting-edge software that leverages AI to optimize logistics and reduce carbon emissions in transportation networks. His software, called EcoTrack, has shown promising results in early trials, especially for small and medium-sized enterprises. Luca is confident that with further development and testing, EcoTrack could become a leader in sustainable logistics technology.

To move from a prototype to a full-scale market-ready product, Luca needs substantial capital. He’s considering several options, including securing a business loan from a major financial institution or seeking venture capital investment. Recently, during a conversation with an old university friend, Jade Rivers, now a successful startup advisor, Jade suggested that Luca should think about setting up a public company but warned him about the pitfalls of early-stage public offerings. Jade also recommended that Luca consider using a unit trust to protect family assets.

Luca’s cousin, Elena Harris, is a computer engineer currently working in Silicon Valley. Elena has been a valuable resource in testing and refining the EcoTrack software during her spare time. Luca sees this business as not only his retirement plan but also a long-term financial legacy for Elena and his younger brother, Max, who is studying computer science in Melbourne. Luca hopes to keep the company family-owned initially, with the option to bring in external investors when necessary.

Luca is currently unsure which business structure will best serve his goals, considering his desire for flexibility, control, and potential future growth. He is evaluating multiple structures, including sole trading, partnerships, trusts, and companies, while considering how best to protect family assets and manage future investor relationships.

Meanwhile, Elena recently signed a contract on Luca’s behalf with Adam Kerr, the CEO of TransportLink Pty Ltd, a logistics firm interested in using EcoTrack to improve its operations. The agreement provides for an 18-month pilot, with a substantial fee payable quarterly. Luca, however, is now concerned because he’s been approached by ClimateSystems Ltd, another firm offering a potentially more lucrative deal, though this new contract could come with stricter obligations and longer commitments, including an obligation to not be bound under other similar agreements – known as a non-compete clause. Luca is unsure how to proceed given that the TransportLink contract was signed before any formal business structure was created.

QUESTIONS:

Q1.

Luca asks you which type of business structure would be best for his situation. Compare and contrast trusts, sole traders, partnerships, private and public business structures, and suggest which would be most suitable for Luca’s commercial goals. You must also explain to Luca how to set up his new business, including relevant steps, documents, and processes. Consider whether a trust structure would give Luca additional flexibility in managing his business and family assets.

Q2.

Luca is also concerned about the contract with TransportLink Pty Ltd, given it was negotiated and signed by Elena before any business had been formally created. Advise Luca regarding the best way to ensure that the contract remains enforceable once his business is set up. Consider how this could affect his potential deal with ClimateSystems Ltd.

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