One of the most crucial decisions you have to make before starting a business is determining the business structure. The structure of your company will depend on various factors such as your business type, mode of operation, and expansion potential or plan. In Australia, you could choose from four business structures.
The Sole Trader Business Structure
With this arrangement, you operate your business on your own, and your income tax would be calculated similarly to personal tax rates. However, take note that should anything goes awry with your business, you’ll be the only one legally liable, which could put your personal assets at risk, explains one of the reputable commercial lawyers in Townsville.
The Company Business Structure
When you go with a company structure, you’ll be forming a legal entity that the ASIC or Australian Securities and Investments Commission regulates. You’d need to hire directors and shareholders to run your operations and pay income tax at company tax rates, which are significantly higher, but you could also qualify for tax breaks. Having a company could offer better liability protection since it’s limited to assets of the company.
The Partnership Business Structure
This involves two or more individuals owning and operating the business. A partnership is especially advantageous if you’re looking for funding since the risk would be shared among partners. A primary disadvantage of a partnership is potential disagreements between business partners. It’s likewise crucial to note that should one partner make a mistake, all the partners would be legally liable for that error.
The Trust Business Structure
With a trust structure, you appoint a trustee, either a company or an individual, who would be conducting business on behalf of the trust’s beneficiaries. You get to decide the distribution of profits, such as splitting the income among beneficiaries, who then need to pay income tax on the income they get from your trust.
Many important factors could make or break your business’ success and among these is your chosen business structure. Fortunately, you have four main options to choose from, and you are free to change structures as you expand or improve your business goals. To that end, consult a commercial lawyer for expert legal advice and to learn more about the advantages and potential disadvantages that each business structure offers.