Business Services

Business Structuring

Getting the business structure right from the start is critical to business success and tax management, particularly for small businesses. We can advise on the best structure that suits your plans and assist in the setup of new business structures including:

  • private companies
  • family trusts
  • partnership
  • sole trader
  • unit trust
  • joint venture
  • self-managed superannuation funds

Ensuring you get 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