Business Structure Basics

The first decision when starting your business is which structure you should use. This is one of the most important decisions you will make in business. Although if you already operate a business, now is not the time to tune out! Depending on your situation, you can change and update your structure to better suit your circumstances.

The structure you adopt will have different consequences for taxation liabilities, compliance costs and the legal protections offered to you and your personal assets. We will be examining the following structures over the next few articles. Here is a brief introduction. 

• Sole Trader:
  • You operate as the exclusive owner of the business in your personal capacity. You are legally responsible for all operations of the business but also retain the profits (after tax).
• Partnership:
  • This is usually chosen when by multiple people are entering into a business together. It allows the income and losses to be distributed between the partners, and liabilities are personal. The partnership is not a distinct entity.
• Company
  • This is a ‘separate legal person’, which means that you have different legal and financial protections. If this sounds a bit abstract, do not fear! We will be unpacking this concept and the practical benefits for you and your bottom line in subsequent articles.
• Trust
  • You may have heard of family trusts being used as investment vehicles, but what you may not have known is that these can also be used to run a business. The central advantage of a Trust structure is the capacity to split income between ‘beneficiaries.’

If you have further questions, please contact frank@franklaw.com.au

This is not legal advice. 

Written by Tim Cargill & Zdenka Marinov and edited by Andrew Graham.