When starting up a business deciding on a legal structure is one of the first considerations you need to make.
Setting up the best legal structure for your situation and your business, or moving to a new legal structure, maybe one of the most strategic decisions you make. There are many complex issues to consider when choosing or setting up a new structure for your business. This is why it’s wise to bring in an advisor who understands the issues and has seen the mistakes owners often make.
Types of Business Structures in Australia
There are several types of business structure available in Australia, including sole trader, partnership, company or trust, and a range of variations on these. The structure of your business impacts many things including the amount of tax you pay, the level of risk and personal liabilities you take on, how assets such as your home are protected, how easy it is to bring on additional owners, as well as regular reporting obligations.
How Do I Choose the Best Business Structure?
Determining the right business structure will largely depend on your circumstances. For example, a family business is typically operated in Australia through a Family Trust. However, this is inappropriate for a business where the business owners are unrelated. A Discretionary or Unit Trust may be the best structure in such a situation. The major benefit of Trusts is the flexibility they provide with regard to the distribution of profits.
Sole proprietors and partnerships are much less complex to establish and administer, however, they do not provide the safe-guards and tax benefits that an incorporated corporation provides.
As a dedicated business accountant, Ahead for Business is well placed to assess your unique situation, goals, and industry to advise you on the best business structure with regard to the impact on your tax and financial flexibility, both now and into the future.