Business Structures

The needs and requirements of which structure to choose may depend on various factors, including:

1. the type of business being conducted or acquired
2. your objectives in acquiring or expanding the business
3. stamp duty, capital gains tax, income tax position (see also Taxation)
4. costs of registration or incorporation and annual administrative costs
5. whether the business is or will be conducted in one State or more than one State
6. asset holdings, whether in personal names or held by another entity (see also Asset Protection)
7. whether you are acquiring appreciating assets
8. who and how many people are involved in the business as owners and employees
9. financing requirements of the business and any securities to be provided (see also Banking and Finance)

Each structure has its own advantage and disadvantage taking into consideration the above factors. Some forms of business structures are:

• Sole proprietorship - where a person operates a business in his/her own name with a business name registered in the relevant State where the business is operating
• Partnership (see also Partnerships) - where two or more individuals (or trusts) set up a business and share the profits (losses) of the business in accordance with the partnership agreement
• Joint Venture (see also Joint Venture Agreements) - where two or more individuals (or trusts/companies) wish to operate a business without necessarily forming a company and certainly do not wish to form a partnership.
• A Proprietary Company (see also Corporations/Companies and ASX Listing and Compliance) - where up to 50 shareholders (or individuals/companies/trusts) can set up a business with the protection of limited liability
• Trusts (see also Trusts) - where individuals do not wish to own the business in their own names for asset protection and also have the option to split the income with other family members
  • Discretionary trust (non-fixed trust)
  • Unit trust (fixed trust)
  • Hybrid trust
• Superannuation Funds - where individuals who have their own superannuation fund with money to invest or they do not wish to own the business in their own names

It is important to choose a structure carefully at the outset since where you have already started the business using one of the structures and later on wish to change the structure, you will have to consider stamp duty implications, impact of capital gains tax and possible loss of income tax benefits (such as tax losses).

You should consult your solicitor and tax advisor before setting up an entity to operate a business or restructuring an existing business or holding.

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