When starting out in business one of the most important decisions to be made is identifying what type of business structure is most relevant to your needs. Thus it is important to review the advantages and disadvantaged of each different business structure the most common being
- Sole Trader
A sole trader is an individual who is legally responsible for all facets of the business. This is the simplest and least expensive business structure for those commencing business in Australia.
A partnership is two or more people or entities running a business together. A partnership is relatively easy to establish and requires its own tax file number.
A company is a separate legal entity that has the same rights as a natural person. A company is owned by shareholders who can limit their personal liability and are generally not liable for debts.
A trust is an entity that holds property or assets for the benefit of others called beneficiaries.
When making the decision as to which business structure is most suitable for your needs investigate each option carefully in order to understand what licenses are required, what tax is payable, what control do you have over the assets, what are the ongoing costs & what is your status within the entity.
As a business grows and expands it may be necessary to change the business structure. Obtaining professional assistance is important so speak to your accountant or business advisor when deciding upon a business structure.
Please note: Prepared by Leigh Barker Tangible Assets, Accountant at MWC Group, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.