Deciding on your business structure is an important decision and one that will affect the future operation of your business, including liability and tax consequences. It’s important then that you consider the different options and make a decision based on the specific needs of your business.
Sole Trader: A sole trader business is a business operated by one person alone. Sole trader registrations made up 57% of all new business registered in 2014!
Partnership: A partnership arises when 2 or more people co-operate the business and share the income. Each partner acts on behalf of the other partners, and there is no real separation of the partnership from the operating business.
Company: A company is a separate legal entity. This means that a company is it’s own legal person, separate from all its shareholders and officers. Companies are incorporated under the Corporations Act 2001 (Cth), and is governed by the Australian Securities and Investments Commission (ASIC).
What are the advantages of each business structure?
A sole trader:
- can set up his/her business cost effectively and relatively easily
- has complete control over the management of the company
- holds all of the business’s profits and assets
- has less regulation governing the business
- does not need to disclose any profits of the business to the public.
- is governed by a partnership agreement that is easy to administer
- combines the resources and expertise of a number of people
- does not need to disclose any profits to the public
- separate legal entity
- its shareholders are not liable for its debts
- it can enter into contracts as itself
A company can trade anywhere in Australia and has a lower tax rate than the highest tax bracket for individuals.
Forming a partnership
Registering your business
Once you have decided on your company structure, your next step may be to register your company. LawPath offers different options to take this next.
Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our largest online network of expert lawyers or to get answers to your legal questions.