Hello Everyone! Welcome to Episode 5 of Legals and Biz with Riz! Today, I’ll be talking about Choosing a Business Structure in Australia.
You know you want to start a business. You know what you want to sell and how you want to present your brand. You’re ready to make this big ol’ dream real life! Now you just have to make it legal so you can start the dang thing! So how the heck do you do that? What kind of business structure are you meant to choose? You may be keen to start as a sole trader so you can fully run the show. But that also means capital may be harder to raise and any of the yuck falls solely on your shoulders. On the other hand, you could saddle up with a partner and share in the good and the bad. How about registering as a company? Or a trust? With 4 serious options to consider, you need to grab that cup of joe or glass of vino (only 1 glass, these are big decisions to make!) and get listening.
I'll take you through some key facts for successfully choosing a business structure in Australia and give you the dirt on how to build your new brand empire not just brilliantly, but legally. How good is that? Each option has its own pros and cons and you’ll need to decide based on your own individual circumstances which option is best for you. Got it? Good. Ao if you need a little help making the best choice for your business, listen up.
Quick facts on Sole Traders
To operate as a sole trader you’ll need to register your business name and apply for an Australian Business Number (ABN).
You may also need to register for Goods and Services Tax (GST) if applicable.
- You have full control of your assets.
- You have full control over business decisions.
- You can employ people (but there are compulsory obligations you must comply with such as workers compensation insurance).
- It’s easy to change your business structure down the line.
- Full personal liability.
- You’re liable to pay tax on all income.
- You may have a limited capacity to raise capital.
- Companies must be registered with the Australian Securities and Investments Commission (ASIC) which will issue you with an ACN.
- Companies must apply for a tax file number (TFN) and use it when lodging annual tax returns with the Australian Taxation Office (ATO).
- Companies must be registered for GST if annual turnover is $75,000 or more.
- The rules you must comply with when managing a Company are set out in the Corporations Act 2001.
- Companies may require legal documents like a Shareholders Agreement.
Limited personal liability.
- Expensive to set up.
- Stricter regulations.
- Additional administration and tax reporting
- There are two types of partnerships, general and limited.
- Partnership tax returns must be lodged with the ATO.
- Partners are responsible for their own superannuation arrangements.
- Partners in business have shared control in management.
- Easy to set up.
- Low administration costs.
- Shared workload.
- Pooled assets.
- Joint liability.
- Liable for debts accrued by partners.
- Can get messy if clear guidelines aren’t in place.
- Companies can be nominated as trustees.
- Setting up a trust requires a formal trust deed that outlines how the trust operates, this deed will need to be written up by a lawyer (or team of lawyers depending on the scope).
- Trustees have set administrative tasks they must complete each year.
- More privacy afforded compared to a company structure.
- Trustees can distribute income at their own discretion depending on trust structure.
- Depending on the set up, liability can be limited.
- Expensive and legally complex to set up and maintain.
- Losses can’t be distributed, only profits.
- Borrowing money can be trickier due to different loan structures.
Top Tip: To learn more about business structures, I’ve included a link in my show notes to a great video by the ATO.
If you’ve decided which structure is right for you, you’ll need to think about registering your business and your business name. Regardless of whether you choose to be a sole trader, company, partnership or trust, you’ll need:
- A registered business name
- An Australian Business Number (ABN)
- A Tax File Number (TFN)
You may also need to register for GST. We also highly recommend you run a check of IP Australia to make sure your name is not already taken before going to the expense of registering a domain or business name.
Structuring your business properly is a major key 🔑 to long-term success. Spend time giving your company structure serious consideration. The right decision will save you time and money down the track. I’ve also put together a handy checklist for all those budding entrepreneurs out there who are yet to get their business off the ground or have just started. Check out the link in my show notes!
If you have any questions about choosing the right business structure for you, take advantage of our complimentary discovery call. We’d love to hear from you!
LINKS IN THIS EPISODE
Book a consultation: Schedule Consultation – Foundd Legal
Click this link and then follow the pop-up https://founddlegal.com/
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