Business Structures in Australia

Getting your business structures right is an important part of both asset protection, estate planning and tax planning.

With the right structure, you can rest assured knowing that you’re set up, ready for what business and life can throw at you.

So What Are Your Options When it Comes to Business Structures?

A sound structure is usually made up of a number of entities including companies, trusts, individuals and self managed super funds.

You could choose a:

1. Company;
2. Trust (in its various forms such as family trust, discretionary trust or unit trust);
3. Sole Trader;
4. Partnership; or
5. Self Managed Super Fund.

But it all comes down to the specific purpose for that particular entity.  For instance, it is best practice to have business trading entities separate from those that hold assets like an investment property.

What Could Influence the Choice of Your Business Structure?

The choice of how to structure your business depends on a number of factors:

1. The type of business you operate;
2. The regulatory requirements for your industry;
3. Your existing wealth and income levels;
4. How large you intend to grow the business; and
5. Whether you are building the business for lifestyle or eventual sale.

How Much Should You Budget for Your Business Structure?

Your budget for a business structure depends entirely on your circumstances and the intended use for the structure.

It can cost anything from a few hundred dollars to tens of thousands of dollars to ensure you’re set up in the best structure for your circumstances.

It’s always best to keep the end in mind too when planning your structure out.  And it is possible to set up structures in stages, where you can increase the level of asset protection, estate planning and tax planning as you progress.

Here’s a Comparison Table of the Most Common Questions about Business Structures

A basic comparison of the most common business structures is provided below:	Sole trader	Partnership	Company	Trust
Cost to establish and operate	Low	Medium	High	High
Complexity	Simple	Moderate	Complex	Complex
Limited Liability	No	No	Yes	Yes (with a corporate Trustee)
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?	No	No	Yes	No
Can I change the legal structure easily?	Yes	No	No	No
Good ability for tax planning?	No	Limited	Limited	Yes
Is it easy to raise capital?	No	No	Yes	Yes
Is it easy to dissolve or exit?	Yes	Yes	No	No

Each structure has advantages, disadvantages and responsibilities which need to be considered before making a decision.

The best bet is to engage an adviser who knows the ins and outs of business structures and can help apply their knowledge to your specific circumstances.

If you’re looking for an adviser for a structuring session, do drop us a note or give us a call on 1300 852 747.  We can even organise a web session too.