Do you know the right Australian business structure to start your business? It is important to get it right from the beginning. Most of the small business owners use one of the 4 common structures in Australia i.e. Sole trader, Partnership, Company and Trust. Each business structure comes with its own advantages and disadvantages. Talk to your tax accountant in Sydney to find out if your business should be registered as a sole trader or under a partnership, trust or company.
Choosing the right business structure can be challenging to young and seasoned entrepreneurs alike. Some business owners even skip this decision, leaving both their personal and business interests at risk.
When deciding on a structure for your business, consider your personal liability exposure from your products and services, determine if you have or will have partners or investors in the business, exit strategy and compliance requirement. You should also consider the tax effectiveness and administrative costs of the set-up and maintenance of the business structure.
In Australia, you can structure your business as a sole trader, which is the least expensive and simplest option but with not much asset protection from claims arising from the business. Pty Ltd Company or incorporation is another option that effectively separates the business as a legal entity from you. However, maintenance can be expensive and paperwork can be quite a load but it can effectively protect your personal assets from liability in case the business gets involved in any legal actions or debts.
Another business structure option is partnership, which allows the owner to go into business with multiple people and share income. This may be less expensive and easier to set up than companies but the partners will all be responsible for the actions and debts against each partner and against the partnership altogether. In other words, partnership is at risk of unlimited liability.
Trust, on the other hand, is a legal structure that can hold assets. You can set up a trust to hold business assets and appoint a trustee to manage them. The trustee is often a company with the trust providing asset protection and limit in liability. While trusts are flexible for tax purposes, it is a complex legal structure that can also be expensive.
Once you’ve chosen a structure for your business, you would need to register your business and business name with Australian regulators and organisations such as ASIC, Australian Business Register, IP Australia and Australian Business License and Information Service. You would need an Australian Business Number (ABN) and Tax File Number (TFN) and register for GST. You may also want to register for a website domain and in social media.
You can change your business structure, business name, brand name, logo and branding image anytime you want but remember that there are substantial risks and costs in doing so.
Choosing the right structure is very important for the business. It is best to seek professional help from a tax accountant in Sydney and get it right early on to save you time and money down the road.
If you would like to know more about business structures, you can click here to know more about Chan & Naylor services. You can leave your details here and we can schedule you for a free consultation. We’ll contact you to explain more.
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