A business structure should be selected that best suits the needs of the individuals. Some of the most common business structures include:
- sole trader – a single individual controls and manages a business;
- partnership – individuals or entities that control the business as partners and jointly receive income;
- family trust – a trustee holds property and earns and distributes income for the benefit of others (the beneficiaries);
- company – a legal entity that is separate from its shareholders (the owners). The directors (elected by the shareholders) are responsible for making all the decisions and entering into all contracts for the company.
Some issues to consider when choosing an appropriate business structure include:
- purpose, nature and objectives of the business;
- credit and capital requirements for the business;
- limiting your liability for business debts;
- ease of operating the business;
- management and control on the business (i.e. flexibility to review your business operation should your objectives change in future);
- simplicity and cost reduction;
- minimising your taxation liability; and
- ease with which the interest in the business may be transferred to others in case you want to wind up your business.
Seek professional advice
||It is essential to seek professional advice when deciding on and setting up your business structure. Advice should be obtained from your accountant before determining an appropriate business structure. Your accountant is able to give relevant advice and options relating to each structure that your business could consider. It is also highly recommended you seek advice from a solicitor.
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