Business Structures, Governance and Risk Management

Business Structures

Deciding upon the right structure for your business is a key decision. The implications of choosing the right or wrong structure can be far reaching and long term. That is why it is important to consider the different business structures and which suits your commercial needs best. We strongly recommend that professional legal advice is obtained regarding the right business structure for your needs.

In Australia the four most common business structures are:

1. Sole trader
2. Company
3. Partnership
4. Trust

 

Differences between business entities

There are many differences between the above entities. It is important to obtain professional legal, accounting and taxation advice when considering the right business structure for your needs. Below we summarise some of the features of each business structure:

• Sole Traders are individuals. As a sole trader you will be legally responsible for all aspects of your business. You can employ other people. All of the risks and rewards of operating your business are yours alone.
• Companies may be public or private. A company is a separate legal entity. It has the same rights as a natural person – it can borrow money, sue and be sued in its own right. The owners of a company are called shareholders. Unlike a personal business, such as a sole trader, they can limit their liability and are not generally liable for a company’s debts.
  • In Australia the most common form of company in the small to medium sized enterprise is called a proprietary limited company, usually ‘identified by the words ‘Pty Ltd’ at the end of the name.
  • Companies must be registered with the Australian Securities and Investments Commission (‘ASIC’). Different tax rates apply to company profits. They are more complex than other entities and must comply with the all Corporations Act 2001 rules and regulations. Set up and running costs may be higher than with other entities.
• Partnerships are not incorporated. They are typically entities where individuals work together in a business as a partnership. Partners may be exposed to liability due to the conduct of their business partners. It is very important that any partnership is formed carefully and with the right agreements in place.
• Trusts are entities where property including businesses may be held by one party, trustees, for the benefit of others, beneficiaries. They are complex legal arrangements and it is very important to obtain professional advice when considering using a trust in your business.

 

Governance and Risk Management

Companies must comply with the myriad of rules and regulations such as those found in the Corporations Act 2001. As well as maintaining their details with ASIC and paying annual fees they must also lodge annual company tax returns with the Australian Taxation Office (‘ATO’).

We recommend that anyone considering setting up a company or any other business entity obtain professional legal advice to ensure that business, company and directors’ legal duties and responsibilities are clearly understood. There can be substantial penalties for non-compliance with the law.

 

Legal services for your business

Bell Legal Group’s Commercial team can discuss your needs and provide specific legal advice tailored to your own situation.

The contents of this page is general in nature and is not legal advice. For legal help and advice with your business structure, governance and risk management please contact our dedicated Commercial Law team by calling 07 5597 3366