In Australia, entrepreneurs have a range of options available to them when looking to start and structure their business ventures. Each different has its own advantages and disadvantages or considerations but allows for flexibility when it comes to a business’ goals.
The primary structures available in Australia are:
Sole Trader
A sole trader operates their business as an individual without the need for a separate legal entity. This structure is simple and cost-effective and allows for a business owner to have full control over the business. However, it is important to mention that this also means they bear personal responsibility for business debts and liabilities.
Partnership
A partnership involves two or more individuals or entities sharing the responsibilities and profits of a business. While the structure of a partnership is relatively straightforward, partners must be aware that they may share financial obligations and personal assets can be at risk.
Company
A company is a separate legal entity distinct from its shareholders (the owners of the company). A company offers limited liability which allows shareholders’ personal assets to be generally protected from business debts. However, a company is subject to more regulatory requirements and have a more complex structure than other structures and may often be more suitable for larger enterprises.
Trust
A trust is a legal structure where a trustee manages assets on behalf of the trust beneficiaries. A trust can offer flexibility in income distribution and can be advantageous for tax planning, asset protection, and estate planning.
Association
Commonly used for non-profit organizations, associations are entities formed to achieve specific goals, often related to community or charitable purposes. Members typically have equal voting rights in decision-making processes.
Limited Partnership
A limited partnership consists of partners who manage a business and limited partners who contribute capital but have limited involvement in management. Limited partners are protected from personal liability beyond their investment.
Incorporated Association
An incorporated association, similar to associations, are non-profit entities however there is a formal registration process that must be undertaken as they have a separate legal identity and provide members with limited liability.
How can Nevett Ford help?
Choosing the right business structure is a critical decision that influences legal responsibilities, tax implications, and the way your business is run and succeeds. There are multiple issues that need to be considered including the size of the business, liability concerns, and future growth plans so seeking legal advice is always recommended to ensure the chosen structure aligns with the specific needs and goals of the business.
For more information please contact our Commercial and Business Team on 03 9614 7111 or by email at melbourne@nevettford.com.au.