Before starting a new business, the first thing that you need to consider is the structure of the entity to operate the business.
There are numerous options to choose from, such as:
- sole trader;
- company; and
- unit trust.
This is when it can pay to get good accounting/taxation, financial planning and legal advice as there are advantages and disadvantages associated with each type.
WHICH STRUCTURE IS THE BEST?
There is no right or wrong answer to this necessarily, although some are preferred more than others.
To determine the most appropriate structure, you need to consider what is most important for you and your family and things such as what assets/business you already have interests in, whether you intend to be in business with others or you’ll go it alone, how you intend to run the business and whether it is a long term plan or whether you intend to quickly build and sell it.
Each option has different qualities, including:
- simplicity vs complexity,
- asset protection vs personal liability,
- income going to one individual vs ability to minimise tax through income splitting,
- taxation issues on sale such as CGT exemptions; and
- business succession planning issues.
OTHER THINGS TO CONSIDER
Once the structure has been determined, and depending on the structure to be adopted, other things that need to be covered off include:
- Partnership Agreement / Shareholders Agreement / Unitholders Agreement
- Trademarks, Domain Names, Business Names
- Tax File Number, ABN, GST registration
- Terms of Trade
Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to starting or buying a business, drafting business documents or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email firstname.lastname@example.org.