When setting up a new business, one of the most important things to consider is not the name, but the legal structure. Whether you’ve been in business all your life or just getting started – professional advice on the best structure for your new business could be invaluable. You need to consider how many people are going to be a director, shareholder or partner in your new business and also consider how flexible you want the business to be if you ever need to change the legal structure in future.
Sole Traders & Partnerships
If you are setting up a small business on your own or are looking for a simple way to set up with partners then a sole trader or partnership agreement are the best way to go for you. It is one of the easier business structures to set up, however there is no reduced liability on the debts of the business for yourself or your partners.
If a Sole Trader or Partnership agreement is not suitable for you, then you may need to consider a more formal company structure. There are a number of different structures available, each with different rules regarding liability.
The two main types of limited liability company structures are, Limited (Ltd.) and Proprietary Limited Company (Pty. Ltd.). The main difference between the two being a Ltd. company is a public company which could be listed on the Australian Stock Exchange. Whereas a Pty. Ltd. company is a privately owned organisation.
There is another formal company structure of Unlimited Proprietary (Pty.) which is similar to it’s limited counterparts, however the members and shareholders liability is not limited.
A trust, simply, is a legal structure for an arrangement where assets are held and managed on behalf of an individual or a class of individuals. The two main types of trust are a family / discretionary trust and a unit trust. The former allows the trustee to have discretion over who receives distributions from the trust and when. The latter is more like a shares arrangement where beneficiaries of the trust own a number of units and receive distributions at the end of each year.
So Which Structure is Right For Me?
It depends entirely on your circumstances which business structure is the right one for you. If you make the wrong decision it could end up costing you a small fortune in the near future. Even if you make the right decision for now and don’t structure things so they can expand properly, you could find yourself in a tricky situation later down the line.
When you’re thinking of starting a business, get in touch with Antunes lawyers and ask to speak to one of our professional Investment and Business Structuring Lawyers today on 02 9964 0499.