It is so important to choose the right structure for your business. How your business is structured can have a significant impact on legal and operational risk, tax obligations and benefits, costs and asset protection.
The four most common business structure types are:
- Sole trader
Sometimes, a combination of these structures is used. There are times when the original business structure is no longer the best choice – in these cases, there may be options to restructure.
This is the simplest form of business structure and relatively easy and inexpensive to set up.
As a sole trader, there is no legal separation between you and your business. You are legally responsible for all aspects of your business including any debts and losses and day-to-day business decisions.
A partnership is a group of two or more people who carry on business together and distribute income or losses between themselves under the terms of a partnership agreement.
Each state and territory governs partnership laws, so it is important that you find out what is relevant to you.
A company is a separate legal entity, unlike a sole trader or a partnership structure.
This means the company has the same rights as a natural person and can incur debt, sue and be sued.
Companies are expensive and complicated to set up. Because of this, they are best suited to people who expect their business income to be high or to vary, and want the option to use losses to offset future profits.
In a trust structure, a trustee holds your business for the benefit of others (the beneficiaries).
A trustee can be a person or a company, and is responsible for everything in the trust, including income and losses.
Trust structures are expensive and complicated to set up, and are generally used to protect the business assets for beneficiaries. A trust is governed by a trust deed. The trustee decides how business profits should be distributed to the beneficiaries.
Get in touch!
TGB Lawyers can help you choose the right structure for your business, taking into account your specific circumstances. We can help you prepare the necessary paperwork, and take the stress out of this step, so you can focus on getting your business off to a great start!
We have established relationships with Accounting firms who can offer expert tax advice about the best structures to suit specific situations, for your peace of mind.