Business structuring

Establishing and reviewing your business structure is crucial for maximising operational and tax efficiencies, minimising risks and achieving your goals.

A crucial consideration for every business

Whether starting your own business, implementing a growth strategy with a new business line or acquiring new assets, establishing the right ownership structure is critical to ensure appropriate operational efficiencies, avoid unwelcome tax implications and achieve your goals.

If you are setting up a business and are yet to be locked into a specific business structure, it’s worth seeking expert guidance to assess what is suitable for you now and into the future. The most common business structures each come with their own advantages and disadvantages, so a structure that may be appropriate for one circumstance could be entirely inappropriate for another.

Continual review is key

Depending on the long-term goals of your business, you’ll need to consider legal elements such as asset protection and how well your business structure is understood by finance, accounting and legal professionals. You’ll also need to consider whether you plan to hire a team, how much you expect your business to earn, tax laws, regulatory considerations and your succession and exit plans.

Business structures should be constantly reviewed for appropriateness of prevailing economic, taxation and personal circumstances.

The importance of the right structure

Set your business up for securing funding, debt or equity
Establish operational efficiencies
Maximise your tax efficiencies in the short and long term
Minimise compliance costs
Assure ideal conditions for future ownership transition
Minimise your risks and protect your assets
Achieve your goals and maximise your wealth

What are the most common business structure types? 

Sole trader

Running your business as a sole trader is straightforward and the costs of establishing and administering the business are low. You trade in your name and your business’ income and expenses are included in the business schedule of your personal tax return. However, your personal assets are exposed as there is no separation between business and personal assets. There is also no tax flexibility.

Partnership

A partnership is an association of two or more individuals or entities running a business together in an unincorporated manner. A partnership is not a separate legal entity and care must be taken with asset protection because each partner has joint and several liability for the business’ activities. The partnership itself does not pay tax and any profits or losses are shared by the partners and taxed in accordance with their circumstances.

Company

An incorporated company operates as a separate legal entity and is controlled day-to-day by its directors, with ownership split between its shareholders. Company structures are regulated by the ASIC. While a company structure provides basic asset protection, its directors can still be legally liable for their actions and, in some cases, the company’s debts. Profits are taxed within the company and distributed by way of dividend. Losses are retained within the company and can only be offset with profits of the company.

Trust

A trust is an entity that holds property for the benefit of others. Although very common in Australia, it is a relatively complex structure to understand and administer. A trustee (individual or company) must be appointed to operate and administer the trust. Generally, a corporate trustee is preferred to generate similar asset protection to that of a company trading in its own right. Profits and funds generated in a trust can be fixed or discretionary and are generally distributed to beneficiaries who become liable for any tax on the profits. Losses are retained within the trust and cannot be distributed to beneficiaries.

Finding your ideal business structure

When it comes to business structuring advice, there is no one-size-fits-all solution. We take the time to fully understand your specific circumstances to ensure the ideal structure and outcome for your business.

Once the most appropriate structure has been determined, we can help with: