Are you thinking of setting up your own business? If so, have you decided on the business structure which will be ideal for your new firm? The business structure of a company should be the first thing to be decided and confirmed, before you start putting your business plan into action. Your tax liabilities and payments, management of the business operations, legal identity in the market and consequent success depends on the structure you choose for your new entrepreneurial venture or company in Australia.
If you have decided to take the Australian industry by storm, then decide on the best structure for your business.
There are four main types of business structures which you can choose from in Australia, which are,
- Sole trader
Each type has a distinct business structure and style, with linked legal requirements and liabilities which a company has to fulfill, or risk facing a legal action against them in court. It is therefore important that you learn everything about a business structure option before you select it.
It is when an individual operates and trades his own company. In such a business, the sole owner is wholly responsible legally, for all aspects involving the operations of his business in the market. He has to take care of all the debts and losses of the business, and this responsibility cannot be legally shared with others.
It is a simple and affordable business structure to start off a company in Australia. The sole trader makes all the decisions about the running and the starting of the business but can hire employees to help him out.
The sole trader or owner has unlimited liability in such a business structure, but one doesn’t need to have a separate business bank account. A sole trader without any employees doesn’t have to pay any payroll tax, or workers’ compensation.
It is a structure in which many people run the business together. If you are going to run a business with another person, then it’s a partnership. There are two kinds, limited and unlimited. The partnership structures are governed by the particular Partnership Act of 1958.
It is inexpensive to set up, but you need a separate tax file number TFN for the business. You can also apply for the Australian Business Enterprise ABN, but it is not compulsory.
In this structure, the company is referred to as a separate legal entity. This signifies that the company has similar rights as a person, and can incur the debts, can sue and be sued likewise. The owners of the company are the shareholders who can easily limit their personal liability and are not liable for any company debts.
It is a complex business structure which incurs a lot of costs. You will need to register the company with the authorized Australian Securities and Investments Commission. All the officers as well as the directors of the company should work to comply completely with the legal obligations outlined under the Corporations Act of 2001.
A trust is an obligation given to a trustee to take care of the assets or properties, for the sole benefit of the beneficiaries. It is an expensive business structure to operate and set up. A trust is legally responsible for all its operations.
A formal trust deed is required which highlights how the trust is supposed to function.
Make sure you choose the right structure, and ensure the progress of your business in complete compliance with the legal business requirements in Australia.