Which Business Set-Up is Right for Your New Enterprise?

The right business structure can and will have an impact on your tax liabilities, and one of the key choices you’ll face when starting a new enterprise is which business structure works best for you and your organisation. There are four basic approaches to company structure that we will have a look at in this article. The correct structure affects tax obligations, asset protection and setup costs. While you can change your structure later down the line, taking the time to initially consider the right structure is crucial. Circumstances change so it’s worth noting that no one business structure is guaranteed to suit the entire life of the business. What is a Business Structure? A business structure is the legal framework of your organization. Working under a sole trader set-up or under an entity determines your asset protection management and tax liability. Types of Business Structures Sole Trader: This offers full control but also full personal liability. Partnership: Two or more people sharing income or losses, with shared liability. Company: A legal entity that provides a limited liability but involves extra regulation. Trust: A trustee managing operations for beneficiaries, offering asset protection. How to Choose the Right Business Structure A business advisory in Sydney can help you decide on a structure for your business, and choose one that best suits your business needs. What works for one business might not work best for another. It’s important to engage with an accountant or business advisory agency before launching your company. As a sole trader you have the simplest and cheapest business structure solution. The downside is that the debts and liabilities are unlimited so should the business fail, you, personally, will be responsible for all losses. On the plus side capital gains tax has a large tax discount. A sole trader arrangement is also simple and easy to control. There are fewer requirements in administrative processes. A partnership is also cheap and easy to set up, and subject to capital gains discounts. Liabilities are joint and there is, on the downside, potential for conflict between the co-owners. A limited liability company is a separate legal entity with shareholders who hold joint ownership and management decisions are made, usually through a board of the highest shareholders. Financial management is approved by the appointed directors and CEO of the company. The advantages of a company are the limit of liability should the business fail and assets are protected. A trust is a business relationship between a trustee and the beneficiaries of the trust. The trustee legally owns all the assets for the beneficiaries. Trustees and beneficiaries can be persons or legal companies. Many business models operate through a family trust arrangement and benefit from tax deduction incentives and security of assets. When considering the set-up of your new organisation consider the different types of business structures available to you and decide which one best meets the needs of your company and anticipated tax and asset...