Starting a Business – Business Structures

As the start of the new financial year is just around the corner, if you are planning to start a business, now is the time to think of a suitable type of business structure for your business.

Amongst the key decisions you will need make when starting a business is its structure. Your choice of structure will depend on the size and type of business and how you want to run it.

It is important to understand the responsibilities of each structure because the structure you choose may affect:

• the tax you are liable to pay;
• your potential personal liability;
• how much control you have over the business;
• the licenses you require;
• asset protection; and/or
• costs.

There are a number of structures that you can choose from when starting or expanding your business.

Types of Business Structures

For new businesses, the common business structures are sole trader, partnership, company, and trust. The structure identifies your operation as a trading business.

• A sole trader is the simplest form of business structure . As a sole trader you are legally responsible for all aspects of your business including any debts and losses and day-to-day business decisions.
• A partnership is a business structure made up of 2 or more people who distribute income or losses between themselves. Like a sole trader structure, partners are jointly and severally responsible for the debts of the business. Therefore, it is important to consider who you enter into a partnership with, as all partners are equally liable for the actions of the other partners. Partnerships can either be general or limited.
• A company business structure is a separate legal entity, unlike a sole trader or a partnership structure. This means the company has the same rights as a natural person and can incur debt, sue, and be sued. As a member you are not liable (in your capacity as a member) for the company’s debts. Your only financial obligation is to pay the company any amount unpaid on your shares if you are called on to do so. However, directors of the company may be held personally liable if found to be in breach of their legal obligations.
• Atrust can be used to run a business. A trust is an obligation imposed on a person (a trustee) to hold property or assets (such as business assets) for the benefit of others, known as beneficiaries. If you operate your business as a trust, the trustee is legally responsible for its operations. A trustee of a trust can be a company, providing some asset protection.

If you would like to start a business and find out more about your rights and options, Straits Lawyers are here to help. Simply send us an email at info@straitslawyers.com or give us a call on 8410 9069 to arrange an appointment for an interview.

Alternatively, you can book an online consultation with us via this link: https://straits-lawyers.square.site/product/online-consultation-/11?cs=true

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.