Describe The Features of Different Types of Legal Structures For Organisations • Sole trader

What is business structure? Definition from

Business Structures: Choosing the Right Type for You

Starting a new business It can be daunting as well as very confusing. You’re doing a lot of research. types of business structures, You may find yourself in one of two situations

  1. You’re starting a new business You need guidance on the best way forward to structure it; or
  2. Your business Your current business is going through a period of change structure no longer suits the business operations.

In this article we will discuss the four most common features types of business structures In Australia, we will discuss in detail how to set them up chosen structure I will highlight the benefits of consulting with your best friend business consultant during this period of change.

Contents

4 Most Common Business Structures in Australia

1. sole proprietorship (sole proprietor)

Key Features of the Sole Proprietorship Business Structure :

  • Simple recommendations and low cost
  • Relatively easy to change the business structure Easy to develop and easy to dissolve
  • Sole proprietor also assumes full responsibility for any liability (this includes the the business owner’s personal assets)
  • Sole proprietors pay taxes on the net income generated by their business business activity. This income is included on the individual’s tax return and is taxed at the marginal rate
  • The business The owner directly controls the business and reaps all the benefits of his success.
  • Individual traders cannot be employees own business, Therefore, they do not receive the guaranteed minimum excess insurance payments. Sole proprietors may make concessional (deductible) personal contributions up to the annual limit to a designated super fund.

Cost: Low cost and minimal legal formalities for establishment. 2.

2. partnership

Main characteristics of partnership business structure:

Cost: Expensive to recommend. Partnership agreements are strongly recommended. 3.

3. corporation

Main characteristics of a firm business structure:

  • The firm is a separate legal entity. Assets and liabilities belonging to the corporation are completely separate from the corporation’s directors and shareholders. This is an attractive feature business owners to this structure
  • The profits of the corporation remain the business until they are paid to the shareholders.
  • The corporation is required to file an annual tax return and pay taxes on its Profits are taxed at a declining rate, not at the marginal rate
  • Increased regulations to follow. Managers can face serious penalties for violating regulations

Cost: Establishment and compliance costs make it more expensive to establish and maintain

4. trusts

A formal trust deed is required. The deed explicitly defines the trustee’s powers and formalizes the operating procedures of the trust.

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Key Features of the Trust Business Structure :

  • The trustee owns and manages the business assets on behalf of the beneficiaries. The manager may be a corporation or several persons.
  • A corporate (legal entity) trustee provides a higher level of asset protection than an individual trustee
  • Fixed trusts must pay the same percentage of income to beneficiaries each fiscal year (which is based on assets).
  • Discretionary trusts have more flexibility in paying income to beneficiaries
  • Trusts must file an annual tax return
  • Beneficiaries must include their share of trust income on their individual tax returns and pay taxes at their marginal rates

Cost: Trusts are subject to higher compliance and formation costs

Comparing Australian Business Structures

Sole proprietorship

Partnerships

Basic Features

Full control – all winnings and success are given to the owner

The entire partnership is dissolved upon the death of two or more co-controlling partners, simple incorporation, or one partner.

Separate legal entity – Assets and liabilities belong to the corporation, not the shareholders.

Business activities and assets are managed by an administrator on behalf of the beneficiaries. The administrator can be a corporation or a natural person.

Income is included in personal income tax.

The company files an annual tax return. Individual partners pay tax on their share of the income.

The company files a tax return and pays tax at a fixed rate on its profits.

The individual beneficiary pays tax on his share of the income.

Personally liable for business debts.

He is responsible for the actions of his partners.

Liabilities are limited to the assets of the firm.

Liability is limited if the administrator is the firm.

Why is Business Structuring Important?

1. tax consequences

Each business structure Tax effects vary. Each type There are advantages and disadvantages, but the nature and scale of business of the activity has a significant impact on the most effective activities. structure to implement.

2. protection of assets

Note that a trust can provide the same level of protection when there is a corporate trustee as opposed to an individual trustee.

3. Structure Maintenance Costs

Sole proprietorships and partnerships generally have lower ongoing costs.

4. ensure industry compliance.

Expectations of her may be low. structure vary by industry. For example. businessefirms contracting with government agencies often have to operate them business through a company.

advantages of being good. business structure They are important. And remember, the format that works for you business In five years, today may not be the best choice.

Choosing the Right Business Structure For You

Therefore, you need to consider the following concepts

How to Set Up Your Business Structure

Setting up your business all depends on what structure you have chosen. Here are some steps you need to take to update

Sole proprietor

  • Apply for an ABN in your name (you should already have a TFN)
  • Determine if you need to register for GST
  • Register a business Name ASIC (optional)
  • Make sure you have the appropriate insurance coverage
  • If hiring, organize employee contracts
  • If you employ staff, sign up for PAYG withholding and Single Contact Payroll
  • Sign her up for online accounting software, and business significantly easier
  • Open a separate bank account for her business, to separate your business And your personal financial matters

Partnership / Company / Trust

  • Please specify the name of the entity
  • Apply for an ABN and TFN for the entity
  • Determine if you need to register for GST
  • Register a business Name ASIC (optional)
  • Make sure you have the appropriate insurance coverage
  • If hiring, organize employee contracts
  • If you employ staff, sign up for PAYG withholding and Single Contact Payroll
  • Sign her up for online accounting software, and business significantly easier
  • Open a bank account in the name of your company, corporation or trust
  • Need assistance with the following documents required to establish a business entity: partnership agreement, articles of incorporation, trust deed

Seeking the Assistance of an Adviser to Help You Choose a Structure

While you are not bound forever to the business structure you initially choose, Keeping your goals in mind and making the right decisions for your current situation can save you a lot of time, money, and hassle.

It is also important to talk to all stakeholders and get their input. That way you will know 100% what your responsibilities will be. Be sure to include your partner, family members, other business industry owners, your attorney. and business adviser .

See how the team at BLG Business Advisers can help you choose the right business structure for your own unique situation. Take action to create a better future for her. business and speak with us today.

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