Business Structuring Advice on the Gold Coast
If you’ve got entrepreneurial spirit or drive, the decision to start your own business may be the easiest one to make.
But it certainly won’t be the last. From that point on, you’ll be faced with countless choices.
Among other things, you’ll have to choose a name for your business, find the perfect location and choose a business structure. While the latter may seem like a mundane task, deciding which business structure to implement is one of the most important decisions you’ll make because of the legal and financial consequences associated with each one.
At OMB Solicitors, we provide the legal advice and guidance needed to help you decide which business structure is the best for you.
Most people going into business for themselves will start out by running the business under their own name. By doing so, they are acting as sole traders.
Establishing this type of business is appealing because it is easy and affordable. However, there are significant disadvantages, too. The chief among these is that your business is not a separate legal entity. This means that your personal assets are at risk if your business incurs significant debt or is sued. Although you can minimize potential damage by getting the appropriate insurance, the risk will always remain. Another disadvantage is that your earnings are taxed as personal income, which can potentially complicate tax planning, depending on how much you make.
If you don’t want to take on the burden of running a business all by yourself, the idea of teaming up with someone else may be appealing. If you do opt to run a business with one or more people, a partnership is the easiest business structure to create.
All you’ve got to do to establish a partnership is draft and enact a partnership agreement. This document will include provisions pertaining to individual responsibilities, how profits are shared, the circumstances in which the partnership will be dissolved and so forth.
However, there are also some disadvantages to keep in mind. The most significant of these is that each partner is personally liable for any debts or other losses incurred by the business. In other words, one person’s mistakes can affect everyone else by putting their own earnings and assets at risk. Because there are tax implications as well, it is best to consult financial and legal professionals before creating or entering a business partnership.
As opposed to the business models we’ve already discussed, the company business structure shields participants from personal liability because it is a separate legal entity. For shareholders, this means that all they stand to lose is their initial investment in the company if something drastic happens.
Some of the lesser benefits associated with this type of business structure are that it is easy to attract investors and that restructuring is fairly straightforward.
The biggest disadvantages associated with the company business model are the initial and ongoing costs.
The last type of business model warranting consideration is a trust structure. Creating one is a little more complicated than some of the others we’ve discussed. However, it does have certain advantages such as reduced liability and tax benefits.
Most people who opt for this business structure create what is known as a discretionary trust. In this type of arrangement, a trustee is chosen to oversee a trust fund in accordance with a deed and allocate specific allotments of capital or income.
To learn more about the discretionary trust model and the other business structures we’ve discussed or for help in determining which is best for you, contact us today.