Business structures : choosing the best one for you
What is the best legal structure option for a new business?
In this episode Helen Kay joins us to chat about Business Structure types.
What are they?
Are there differences from a tax perspective?
If you are already in business, can you change your business structure? We tackle these questions and more on this episode of the “Should I Own a business?” Podcast.
Meet Helen Kay who is a commercial lawyer
Helen is a commercial Lawyer and the principal at Rise Legal.
As a small business owner herself, Helen has a tremendous empathy for small business owners and that’s one of the reasons that we love having Helen on the show. The other is that she likes a laugh!
The subject of business structures can be confusing
Contemplating the different types of business structures can seem a little daunting when you’re first thinking about starting a business of your own.
You might be asking yourself “should I become a sole trader or proprietor (as it is known in some countries)?
Or do I need to create a company? And what about a partnership? It can all seem a little overwhelming.
What is a business structure?
A Business Structure is the foundation and how you set yourself up from a legal perspective when entering into a business.
Most people won’t necessarily know which will be best for them so we recommend people speak with a Lawyer prior to choosing a structure.
Some factors to consider relate to how the different structures may be treated from a Tax perspective.
Others include the industry you plan to operate in and matters such as asset protection.
Consider working backwards from your goal to assist in choosing the best structure for you.
How do you choose a business structure?
The process starts by thoroughly investigating your current situation.
From there it is important to consider how your business will operate.
If your business activities will include things such as Invoicing clients, buying supplies, purchasing vehicles or other plant and equipment and you own a home or other asset, it may be a good idea to speak with your Lawyer about the possibility of becoming a Company.
It can also, in some circumstances, be hard to work with others within a sole trader structure.
What are the most common types of business structure?
Sole Trader or Proprietor, Company and
What are some of the key features of each?
Sole trader –
easy and inexpensive to establish
still some legal obligations
unlimited liability and all your personal assets are at risk
Separate legal entity from you as the owner
Marginally more expensive to establish
Money the Company earns belongs to the company
Joint and several liability
Which professionals should someone consult when thinking about the best business structure for them?
You should always engage the right professional to advise you so that you establish your business in the right way.
Your Lawyer and Accountant are important experts to involve in the establishment of your new business.
Helen suggests that you choose a Lawyer or Accountant with extensive experience in dealing with Small Business.
Equally, choose someone you enjoy working with.
Can you change your structure down the line?
Yes, you can.
In a separate interview with a business owner you can hear about the consequences of not getting the right advice. Goldelucks Doughnuts success story.
Notes: For those amongst you who are a part of our international audience just be mindful that Helen is an Australian lawyer (despite the English accent!) and mentions a number of terms that are peculiar to Australia so the idea there would be to check out the corresponding terms and laws in your country.
And the second thing is just to note that the information Helen talks about during our chat is very general in nature so it’s really important that you don’t rely on it in making any decisions about your own circumstances – we certainly recommend that you consult with a lawyer who can take into account your personal circumstances before giving you any advice.