This document discusses key considerations for starting a business, including legal structures, naming the business, registrations, and obtaining professional advice. It outlines the main structures like sole trader, partnership, trust and company; their pros and cons; tax and legal implications; and setup requirements. Choosing the right structure is important as it can affect taxes and personal liability. Additionally, the document recommends carefully naming the business, informing relevant authorities, and seeking advice from professionals like lawyers and accountants.

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Business Structures

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Introduction
Business Structures presentation attempts identifies elements involved in forming and naming your
own business:
• Legal and tax structures
• Start up method
• Naming your business
• Registrations
• Legal and finance advice

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LEGAL AND TAX STRUCTURES
How you will trade - your first important decision
The structure of your business CAN affect the tax you pay and your personal legal exposure. It is
therefore extremely important to select the most appropriate legal structure.
Structures relevant to small medium size business are:
• Sole trader
• Partnership
• Trust
• Private company

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Sole Trader
Pro
• Simple and inexpensive to set up and manage
• You’re in complete control — and keep all the profits
• Reduced paperwork
• No need to register a business name – you can use your own
Cons
• Complete responsibility for business liabilities like debts or employee claims (Personal assets at risk)
• Hard to take time off
• Can be harder to get finance
• More difficult changing ownership when selling the business
Tax issues
• Business profits are treated as personal income (Limited tax minimisation)
Establishment
• Trade in your own name, or register a business name in each state where you’ll trade (costs vary)
• Register for an Australian Business Number (ABN) and GST if your turn over will be more than $70,000 a year
Ongoing administration
• Business Activity Statements
• Personal Income Tax Returns

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Partnership
Pros
• Relatively easy and inexpensive to set up and manage
• As all partners jointly own the business and its assets
• Easier to get finance with the resources of several partners
• Little ongoing paperwork
Cons
• Each partner is personally responsible for all liabilities, regardless of how much of the partnership each owns
• Partners often disagree. You need to be confident you can work together, even when you don’t see eye to eye
• Changes of ownership can be difficult, depending on the governing partnership agreement and financial resources
Tax issues
• A partnership does not pay tax, but still needs to have a TFN and lodge a return
• Business profits are distributed among the partners, who pay income tax on them
Establishment
• Register your business name or trade under the partners’ names
• Register for an ABN and GST if your turn over will be more than $70,000 a year and TFN
• A partnership agreement needs to be drawn up that will govern your rights in line with the Partnership Act
Ongoing administration
• Business activity statements
• Partnership income tax returns
• Personal income tax returns

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Trust
Pro
• A trust is run by a trustee for the benefit of the trust’s beneficiaries. The trustee is responsible for any debts, meaning reduced
personal liability (especially if the trustee is a company)
• Flexibility in distributing profits to beneficiaries (especially with Family Trusts)
• Easy to sell or pass on ownership
Cons
• Additional paperwork
• Increased ongoing and set-up costs
• Limited life (usually 99 years)
Tax matters
• Annual profits are distributed to the beneficiaries, who pay tax
• Trusts generally do not pay tax (there are some exceptions)
Setting up
• Register your business name
• Register for an ABN and GST if your turn over will be more than $70,000 a year and TFN
• Establish a trust deed which sets out the beneficiaries and trust rules (You may also need a company if you are going to have a
corporate trustee
Ongoing administration
• Business Activity Statements
• Beneficiary income tax returns

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Company
Pro
• Reduced personal responsibility for business debts and other liabilities (although lawmakers are increasingly making company
directors personally liable to a range of legal actions, while lenders will often ask individuals for a personal guarantee)
• Flexibility in distributing profits to other shareholders
• Easy to sell or pass on ownership
Cons
• Additional paperwork
• Higher ongoing and set-up costs
Tax matters
• Profits are taxed at 30 per cent company tax flat rate
• Profits can be reinvested in the company or paid out to shareholders as dividends. Dividends can come with ‘franking credits’ –
credits for the tax already paid by the company, reducing shareholders’ tax
• Reduced Capital Gains Discount which means you will pay more on any capital gains
Setting up
• Create a new company or buy a ‘shelf’ company
• Register company with ASIC
• Register for an Australian Company Number (ACN), GST, ABN and TFN
Ongoing administration
• Annual company reports
• Business activity statements
• Company tax returns

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Other Considerations
How are you going to start your business?
• Start up as a new business from scratch?
• Buy an existing business?
• Join with an established business?
• Work full or part time?
These decisions will have a direct impact on your set up costs, timeframe & the income you can expect to receive.

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Naming Your Business
What’s in a name?
• Naming your business needs careful consideration but keep it in perspective (DO NOT WASTE TOO MUCH TIME).
• The most important question, is your business name available?
• The name will define your business, so ensure it is relevant to your clients and it conveys the service you wish to provide.
• Keep in mind succession planning a name linked to a person may be harder to sell at a later date.
• The business name is significant for future branding & marketing.

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Who needs to know?
When starting a business there are a number of people and agencies that will need to be
informed:
• ASIC if you are forming a company will issue you an Australian Company Number (ACN)
• ATO will issue you an ABN and you may need to be registered for GST, PAYG (If you have employees) and FBT (If you have taxable
fringe benefits)
• Professional bodies and trade associations
• Licensing Authorities (Certain businesses are required to be licensed eg Real Estate Agents and Financial Planners)
• Your employer if you will still be working for someone else when you start your business then you may be legally required to inform
them – check your employment contract.

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Professional Advice
Getting the right legal & financial advice is an essential element in setting up a new business.
Advice is required for many aspects of business, including:
• Bookkeeping
• Lease negotiations
• Written agreements
• Business Acquisition
• Employment Agreements
• Insurance
• Banking

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If you have any queries please call us on 1300 083 691
or
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What Next?

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