Business Structure – Getting It Right
It is important to choose the right business structure when planning to set up a business in Australia. Each type of structure will have different implications on your tax, operating costs, protection of assets and how other businesses deal with you.
Start up and small businesses often choose the “Sole Trader” structure.
Easy to set up; total control; inexpensive; full access to the business profits; retain all after-tax gains when the business is sold. Whilst there are advantages to running a business as a sole trader there are also some limitations.
Limited funding sources; you bear all the business liabilities. A partnership consists of two or more people who as partners will share the responsibilities of the business. Similar to the sole trader structure it is also easy and inexpensive to set up. The risks are similar with the added possibility of partnership disputes.
The company structure is set up as a distinct legal entity and is regulated by ASIC. Some of the advantages of a corporate structure are:
Access to capital; shareholders have better protection from the company’s creditors and legal responsibilities. When you operate a business as a trustee, you hold property or income for the on behalf of beneficiaries. A trust structure enjoys limited liability and the private assets of the beneficiaries and trustee are protected against debts and legal responsibilities.
Unlike the sole trader and partnership structures, setting up and maintaining a company or a trust can be expensive. On the tax aspect, a sole trader, an individual partner and trust beneficiary includes any income or amount received from the business in their personal tax returns while the company pays a separate tax on its income.
Each business structure in Australia has advantages and disadvantages. Choose the best structure most suited to your own goals.
By: Jessie Kara
About the Author:
Filed under Business by on Sep 7th, 2010. 