What are the Major Forms of Structure When Forming a Business?
As a small or medium business owner, choosing the right business structure is an essential step towards success. In Western Australia, there are four major forms of business structures, including sole traders, partnerships, companies, and trusts.
Starting a business can be an exciting journey. However, there are several factors to consider before diving in. One of the most important considerations is choosing the right business structure. The right structure can impact everything from how much you pay in taxes to how much control you have over the business. In this article, we will explore the major forms of structure when forming a business.
Sole Proprietorship
A sole proprietorship is the simplest and most common form of business structure in Australia. This structure is ideal for entrepreneurs who are starting small or have limited funds. As the name suggests, a sole proprietorship is a business that is owned by one person. This person is responsible for all debts and liabilities of the business. The owner also has complete control over the business and keeps all profits.
Partnership
A partnership is a business that is owned by two or more people. In this structure, the owners share profits and losses. Partnerships can be further divided into two categories: general partnerships and limited partnerships. In a general partnership, all partners are responsible for the debts and liabilities of the business. In a limited partnership, there is at least one general partner who is responsible for the debts and liabilities of the business, and one or more limited partners who are only liable up to the amount of their investment.
Company
A company is a separate legal entity from its owners. It is owned by shareholders who have limited liability, meaning their personal assets are protected in the event of the company’s debts or liabilities. A company can be further divided into two categories: a proprietary limited company (Pty Ltd) and a public company. A Pty Ltd company is a private company with limited liability, and its shares are not available to the public. A public company, on the other hand, has shares that are available to the public and is subject to more regulations.
Trust
A trust is a business structure that is used to hold property or assets for the benefit of others. The trustee is responsible for managing the trust and its assets for the benefit of the beneficiaries. A trust can be a good option for those who want to keep their personal assets separate from their business assets.
Conclusion
Choosing the right business structure is crucial for the success of any business. Each structure has its own benefits and drawbacks. It is important to consult with a lawyer or accountant before making a decision. At Appius Lawyers, we can help you choose the right structure for your business and provide ongoing legal advice. Contact us today to learn more.