Let’s break the options down and help you determine which system is best for your business.
Sole trader
A sole trader is an individual who owns and runs their own business. They’re personally responsible for all aspects of the business, including any debts or losses.
There are some advantages to being a sole trader, such as completely controlling your business and making all the decisions. You also keep all the profits from your company.
However, there are some disadvantages, such as being personally liable for any debts or losses incurred by the business.
If you’re thinking of setting up a sole trader business, there are a few things you need to do:
- Choose a business name and register it with the Australian Securities and Investments Commission (ASIC).
- Apply for an Australian Business Number (ABN).
- Open a bank account in the business name.
- Understand your tax obligations and lodge your tax return each year.
Company
A company is a legal entity separate from its owners and can be either public or private. Public companies are listed on the Australian Stock Exchange and must comply with strict reporting and disclosure requirements. Private companies are not listed on the stock exchange and have more flexibility in how they’re run.
The main advantage of a company structure is it limits the owners’ liability. The owners won’t be held personally responsible if the company gets into financial trouble. The disadvantage of a company structure is it can be more expensive and complicated to set up than other types of businesses.
Joint venture
A joint venture is when two or more businesses come together to form a new company. This can be a great way to pool resources and talents to achieve a common goal.
This is typically done when the businesses are complementary to each other and can provide a superior offering than either could on their own. For example, a food manufacturer and a retailer might come together to create a new grocery store brand. The food manufacturer would provide the products, and the retailer would give the storefront and distribution network.
Co-operative
Co-operatives are businesses owned and democratically controlled by their members. Co-operatives can be found in various industries, including agriculture, retail, banking, and healthcare.
There are several benefits to setting up a co-operative. Firstly, as their members own them, they’re more likely to act in the best interests of their members. Secondly, co-operatives tend to be more stable and resilient than other types of businesses, as they’re not reliant on a small group of individuals.
Trust
If you’re considering setting up a trust for your business, there are a few things you need to know. First, you’ll need to choose a trustee. The trustee will be responsible for managing the trust and ensuring the beneficiaries receive the benefits they’re entitled to. You’ll also need to decide how the trust will be funded and what assets will be held. Finally, you’ll need to draft a trust deed outlining the terms of the trust and appoint a solicitor to oversee the process.
Don’t hesitate to contact us if you have any questions about trusts or other business structures in Australia.
Indigenous Corporation
An Indigenous corporation is specifically designed for Aboriginal and Torres Strait Islander people. It’s controlled by its members, who are also its owners.
Indigenous corporations can be formed for various purposes, including economic development, cultural preservation, and social welfare. They can carry out multiple activities, including running businesses, providing services, and engaging in advocacy. Indigenous corporations are subject to both state and federal laws. They must comply with the Corporations (Aboriginal and Torres Strait Islander) Act 2006, which sets out special rules for their governance and operation.
Partnership
In a partnership, each person agrees to contribute money, property, labour or skill and share in the profits and losses of the business. Partnerships can be either general partnerships or limited partnerships.
A general partnership is the simpler of the two. All partners are liable for all debts and obligations of the partnership. This means each partner is personally responsible for the partnership’s debts.
There are two types of partners in a limited partnership: general partners and limited partners. General partners have the same rights and responsibilities as partners in a general partnership. Limited partners have limited liability, meaning they’re only responsible for the partnership’s debts up to the amount they invested.
Getting started with your business structure
At Lakis & Knight, we can support you in providing guidance and legal support when setting up your business structure. Get in touch with us to chat about your goals as a new business.
