Business Structuring and Formation
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It’s best to get things right in your business the first time around. We want your business to operate optimally at its inception, to avoid any consequences that can occur when you aren’t structured in a way that protects your business, or its assets such as intellectual property, and trade secrets. Business structuring and formation is an essential part of any business.
Your business structure choice will be strongly persuaded by the goals and prospects of the potential business.
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Being a sole trader is very simple as you are the only person in the business and you have complete control over its affairs. Sole traders often register their business as their own personal name.
This business structure is desirable for someone who is seeking low start-up costs and total control over the business. However, sole traders must remain vigilant as they are personally liable for any debts, employee entitles or tax etc.
A partnership is made up of two or more people and the profits and losses of the business are distributed between members personally. Partnerships are generally set up using a partnership agreement.
Partnerships are ideal for those who also want low start-up costs, but also holds negatives such as the joint and personal liability of the partners.
Companies are established through registration with ASIC and will show “Pty Ltd” at the end of the company name. The structure of a company will include its directors who are responsible for the overall governance and management of the company.
Companies are ideal for those who are wanting to separate themselves personally from the business itself. Companies are a separate legal entity to its directors. Therefore, a company is separately liable for debts not the directors personally.
Trusts are one of the more complex forms of company structures, as they require additional supporting documentation and may be governed by additional legislation. For example, if you are intending to use a corporate trustee (a trustee that is a company) in addition to the trust deed, you may need to set up a company if not already.
Any shares or assets held by the trustee would need to reflect the capacity that the trustee holds same. Many government and financial institutions require stipulation as to whether a company holds assets as the “beneficial owner” or if the shares are “beneficially held”.
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