Choosing a business structure
The legal structure you choose for your business will affect how you register your business and will also have implications for tax.
A business can be legally structured in several ways and there are advantages and disadvantages for each.
We recommend seeking professional advice from your accountant, solicitor or financial adviser before deciding on your business structure, as you will need to consider many legal, financial and tax issues.
It is important to determine your business structure and type of business before you register a business or company as the steps may differ.
There are four main business structures for small business.
They are:
- Sole trader: an individual trading on their own
- Partnership: an association of people or entities carrying on a business together but not as a company
- Company: a legal entity separate from its shareholders
- Trust: an entity that holds property or income for the benefit of others
Business Structures | ||||
Is the structure difficult to set up? | No | No | Yes | Yes |
Is it expensive to register? | No | No | Yes | Yes |
Do I retain complete control? | Yes | No | No | No |
Are there complex reporting requirements? | No | No | Yes | Yes |
Will my assets (house etc...) be under threat if my business goes into debt? | Yes | Yes | Not as likely | Not as likely |
Do I receive full profits made from the business? | Yes | No | No | No |
Can I employ staff? | Yes | Yes | Yes | Yes |
Do I have to pay myself superannuation, workers comp etc...? | No | No | Yes | Yes |
Can I change the legal structure easily? | Yes | No | No | No |
Do I have the ability to plan tax through avenues like income splitting? | No | Yes | Yes | Yes |
Is it easy to raise capital? | No | Yes | Yes | Yes |
Is it easy to dissolve or exit? | Yes | Yes | Yes | No |
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