Starting Business In Australia Business Structures

Author : Patrick Claydon

Any entrepreneur needs to consider a number of steps when starting a business in Australia. The first needs to be deciding what business structure you’re going to adopt.

The selection of the business structure will dictate which path you take when it comes to a number of subsequent decisions. Therefore, examine the business structures carefully before doing anything else.

Different Types of Business Structures in Australia

Before starting your new venture, you need to select a legal structure for your business from one of these main choices: sole trader (also known as proprietor), partnership, trust or company. There are distinct differences between the four, so you should have a general understanding of them before you make a choice.

* Sole trader - this structure is commonly chosen when one individual makes all the decisions for the company. This doesn’t mean the business is strictly limited to one worker. Typically, a sole trader is an individual owner of the business, regardless of the number of employees working for the business.

Sole trader is a good structure for running a non-complicated business. This is especially true if there is not a lot of outside capital invested in the business, where the sole trader would have complicated legal entanglements with investors. There are several advantages to being a sole trader, including less paperwork, less restrictive reporting requirements, tax losses may be deductible from personal income, and the sole trader is entitled to all profits and ownership of all assets.

The disadvantages include the sole trader being personally liable for all business debts, personal assets may be targeted for business liabilities, outside investment is usually quite limited, time investment and business activity is conducted without the usual employee benefits, and there are issues to consider for business continuity if the sole trader becomes ill or dies.

* Partnerships - are arrangements where there are several joint owners of a business who share the same goals and responsibility for making decisions. Most partnerships create an agreement to cover particular issues such as the amount invested by each, profit division, business roles and responsibilities, rights and privileges concerning financial activity, plus exit strategies for each owner as well as the business dissolution.

* Trust - these are often a chosen structure for running a small business, although it is not a separate legal entity such as a company. Simply put, it is a business structure where a trustee, usually a business, carries out the commercial activity on behalf of the members of the trust, which is set up by the creation of a deed. There are various types of trusts, such as discretionary, unit or a combination of the two called a hybrid.

* Company - this is actually similar to a sole trader or partnership, but exists as a completely separate entity from the business owners. This structure protects owner assets from any type of business liability. It is subject to rules and regulations outlined in the Commonwealth law called the Corporations Act.

Regardless of which structure you choose, it is imperative to seek professional advice about which entity will be most appropriate to operate your business under, as though it may seem a simple choice, it will greatly affect many aspects of your business down the track.

Starting business in Australia enables you to take control of your life. Learn everything you need to know about how to set up, maintain, and grow your business to the point where you can quit your job and spend your life doing what you love.
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