Better business management
Deciding on the best structure for your business can be a little daunting. HFB has worked with countless businesses and has a comprehensive understanding of the advantages and disadvantages of different structures in many situations.
The most common types of business structures in Australia are:
- Sole Trader
Sole Trader – is a person trading as the individual legally responsible for all aspects (including debts and losses) of the business. This structure is compelling to many business owners due to its simplicity however there are several things to be aware of – particularly regarding liability and asset protection.
Partnership – this structure is similar to Sole Trader in that it’s relatively simple and inexpensive to set up. Partnerships involve a number of separate people who run the business together. Again, when contemplating this structure, consideration must be given to the personal liability and asset protection of those involved in the partnership.
Trust – Trusts are a very popular way of structuring a business. In this instance, an obligation (trust) is imposed on a person (trustee) to hold property or assets (e.g. business assets) for the benefit of others (beneficiaries).
A trust is a more complex structure to set up and there are also ongoing administrative requirements. The most common trust is a discretionary trust which is also referred to as a family trust. In simple terms, a family trust is a vehicle to accumulate investments that are protected. A family trust allows the trustee to use their discretion in distributing funds to the beneficiaries and in-turn ensure the profits are distributed in the most tax-effective way.
In certain circumstances, one may choose either a unit trust or a hybrid trust for particular activities.
Company – the key aspect of this structure is that the company is a separate legal entity with limited liability. Companies, like people, can incur debt, sue and be sued. This structure is more complex to set up and there are more obligations to adhere to in the running of the business. This structure appeals to business owners who wish to limit their personal liability and achieve taxation at the corporate tax rate.