Business structuring advice

Collective Financial Partners’ guidance is important when it comes to business structuring advice.

Determining a structure that works for your individual circumstances is best achieved using the knowledge and understanding of our trusted business advisory team.

We dig deep to really get to know the goals, intentions, and vision you have for your business in the short, medium, and long term. Nothing is predetermined and we approach business structuring with an open mind.

However, we know that things can change. If your business grows or changes, we’re happy to help you decide on your next move.

Our team are flexible and can work with you to find the best approach. Thanks to our years of experience in business advisory, we know the ins and outs of structuring and what it all means for you.

Options for business structuring

The choice of business structure will depend on the size and type of business and how you want to run it. Each structure needs to be considered in terms of how it impacts on:

Below are the four most common types of business structures in Australia, as explained by the Australian Government.

Sole trader

A sole trader is the simplest form of business structure. You are legally responsible for all aspects of your business including any debts and losses and day-to-day business decisions.

A sole trader business structure:

You can employ people to help run your business under the sole trader business structure however you must comply with workers’ compensation insurance and superannuation requirement.

Partnership

A partnership is made up of two or more people who distribute income or losses between themselves.

There are three main types of partnerships:

General partnership (GP) – is where all partners are equally responsible for the management of the business, and each has unlimited liability for the debts and obligations it may incur.

Limited partnership (LP) – is made up of general partners whose liability is limited to the amount of money they have contributed to the partnership. Limited partners are usually passive investors who don’t play any role in the day-to-day management of the business.

Incorporated limited partnership (ILP) – is where partners in an ILP can have limited liability for the debts of the business. However, under an ILP there must be at least one general partner with unlimited liability. If the business cannot meet its obligations, the general partner (or partners) become personally liable for the shortfall.

Partnerships:

Company

A company business structure is a separate legal entity, meaning the company has the same rights as a natural person and can incur debt, sue, and be sued.

As a member you’re 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.

Companies are expensive and complicated to set up, and generally suit people who expect their business income to be highly variable and want the option to use losses to offset future profits.

Company officers and directors must comply with legal obligations under the Corporations Act 2001.

Your company must register for goods and services tax (GST) if your turnover is $75,000 or more. The registration threshold for non-profit organisations is $150,000. The Australian Taxation Office (ATO) has more detailed information on your tax obligations as a company.

Companies and directors have key legal and reporting obligations they must comply with. Some of the more common obligations include:

A company:

Trust

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.

It’s worth noting that trust structures:

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.

Get in touch

When it comes to business structuring advice, trust Collective Financial Partners.

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