Business Structures
Unquestionably, business structure is a critical factor that is often ignored by businesses. Clearly, generic growth without proper implementation of a business structure can cause many problems from the perspectives of both effective business operation and tax. Elliott May can provide efficient and viable business structure placement for all scales of businesses that will assist and benefit clients in all aspects of their business.
A commonly overlooked, yet critical component of any business is the legal structure under which it operates. Not only is this critical when commencing a business venture, it is also critical that it is reviewed regularly as your enterprise moves and evolves, and more importantly as it grows you may need to alter the structure your business currently operates under.
In order to determine the appropriate structure there are a number of questions that need to be answered. The below is not designed as a comprehensive list, however it does out line a number of keys areas that need to be considered.
- the type of business being conducted or acquired;
- your objectives in acquiring or expanding the business;
- Stamp duty, capital gains tax, income tax position;
- costs of registration or incorporation and annual administrative costs;
- whether the business is or will be conducted in one State or more than one State;
- asset holdings, whether in personal names or held by another entity ;
- whether you are acquiring appreciating assets;
- who and how many people are involved in the business owners and employees;
- financing requirements of the business and any securities to be provided.
As with the actual enterprise itself, the structure under which a business operates can take many different forms, so it is vital you are provided with the appropriate advice as to which structure best suits your needs.
Below is a list of general structures that can be utilised, each of which can be customised to suit your Enterprise:
Sole proprietorship - where a person operates a business in his/her own name with a business name registered in therelevant State where the business is operating;
Partnership - where two or more individuals (or trusts) set up a business and share the profits (losses) of the business in accordance with the partnership agreement;
Joint Venture - where two or more individuals (or trusts/companies) wish to operate a business without necessarily forming a company and certainly do not wish to form a partnership;
A Proprietary Company - where up to 50 shareholders (or individuals/companies/trusts) can set up a business with the protection of limited liability;
- Trusts - where individuals do not wish to own the business in their own names for asset protection and also have the option to split the income with other family members
Discretionary trust (non-fixed trust) - Unit trust (fixed trust)
- Hybrid trust
- Superannuation Funds - where individuals who have their own superannuation fund with money to invest or they do not wish to own the business in their own names.
Whilst you can make changes to any structure once it has been put in place, implementing such changes are not always easy. You may have to consider stamp duty implications, capital gains tax and possible loss of income tax benefits, legal or other implications all of which may need to be managed as a result of changes to a structure. Hence it is preferable that time be spent planning the proposed future of the enterprise before implementing the structure under which it is to operate to alleviate any such issues at a later date.
Elliott May are able to assist with not only the implementation of such structures, but also with the planning and decision making with regards to the appropriate structure for your needs.
