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Business Structuring

Which business structure is right for you?

When starting a new business, there are a variety of options in relation to how you set up and structure your business. While we highly recommend getting personal and tailored advice, we have briefly outlined some of the pros and cons of common business structures.

Sole Trader

    Pros 

    - Low setup & compliance cos

    - Owner has full control over decision making

    - Simple & easy to understand

    Cons

    - No asset protection

    - No income sharing flexibility

    - Possible finance availability limitations  

 

Trust

    Pros

    - Flexibility in income and capital distributions

    - Possible asset protection with a corporate trustee

    - Added flexibility of adding business partners (unit trusts)

    Cons

    - Higher setup & compliance costs

    - Can be tax disadvantages in certain circumstances

    - Difficult to understand trust concepts 

 

Company

    Pros

    - Separate legal entity (offers a degree of asset protection and limited liability)

    - Added flexibility of adding business partners (shareholdings)

    - Company pays tax

    - Profit can stay in the company and be paid out at a later date

    Cons

    - Higher setup & ongoing compliance costs

    - More complex to withdraw money

    - Increased regulation (Corporations Act)  

    - Increased obligations for directors 

 

 Partnership

    Pros

    - Shared responsibility and obligation

    - Lower compliance costs than company

    - Easier to access tax losses than companies & trusts.   

    Cons

    - No asset protection

    - Potential for decision-making conflict between partners

    - Possible complications when expanding / changing partners

 

The ATO have also created the brief video below which cover some of these key points.

Your decision on which structure to adopt will have considerable consequences on the operation of your business. Therefore, we would highly recommend contacting us on (03) 9870 1300 for personal, tailored advice.

 

 

 

 

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