Business Structuring
Getting the right business structure from the outset is critical to business success, tax management and your future exit strategy. Dicandilo Thomson can advise on the most appropriate best structure to suit your commercial objectives and assist you in all aspects relating to the the setup of your new business including:
private companies
family trusts
partnership
sole trader
unit trust
joint venture
self-managed superannuation funds
The right business structure can not only save you tax but could also impact on risk exposure for your personal assets, including your family home.
When deciding on a business structure it is vital to take into consideration the advantages and disadvantages of each structure.
There are generally accepted 4 main small business structures:
Sole trader
This business structure involves a person trading individually in their own legal right and are they personally liable for all aspect of the business, including all debts and expenses.
Features:
Cheap and easy to set up
The individual has full control of the business and all decision making
Fewer reporting requirements then some other structures
Unlimited liability – if things go wrong your personal assets may be at risk
You can employ people to assist in the business
You can’t split profits or losses, whatever the business makes is declared by the individually business owner
The structure is easily changed
Partnership
This structure is commonly used where there is 2 or more people in business together.
Features:
Easy and inexpensive to set up
It requires a separate ABN and TFN to that of the partners
Unlimited liability – if things go wrong the personal assets of the partners may be at risk
There is shared control and management of the business
The partnership doesn’t pay income tax on the business profit, the tax on the profit is paid by the partners in their personal tax returns
Private Company
A company is a separate legal entity, unlike a partnership or a sale trader.
A company needs to be registered with the Australian Securities and Investment Commission (ASIC)
Features:
It is a separate legal entity in its own right
There are higher set up fees involved
It is a more complex business structure and therefore generally will incur greater running costs
Has limited liability compared to other structures
The business is controlled by the directors and shareholders
Trust (Family Trust and Unit Trust)
A trust structure is where an asset or property (such as a business) is held on trust for the benefit of others known as the beneficiaries.
A very common small business structure.
Features:
More expensive and complex to set up
A formal trust deed outlines the how the trust operates
With a company trustee it offers limited liability
Can have taxation advantages by way of profit distributions