Starting or buying a business is an exciting and challenging time. It is important that you make sure you tick all of the right legal boxes from the start to make sure that you comply with your legal obligations and maximise your business’s potential.
Apart from registering a business name and applying for an ABN, you must also decide what ‘business structure’ you want to run your business in. Here are the three most common business structures and their pros and cons:
- Sole Trader
- One person, who is the exclusive owner of the business. The main advantage is that you get to keep of the business’s profits for yourself. The main disadvantage is that you are personally liable for your business’s debts and liabilities e.g. if your business goes broke your personal assets can be used to pay its debts.
- Partnership
- Two or more people who own the business together. The main advantage of this structure is that you share the costs of running of the business and the business’s liabilities with each partner and have the benefit of multiple people with fresh ideas to keep improving the business.
- The main disadvantage is that each partner is still personally liable for the business’s debts and liabilities which puts your personal assets (such as the family home) at risk.
- Company
- This is the most common business structure in the modern age. The main advantage of a company is that it is a separate legal entity to you, which means that is can hold assets and have debts, enter into contracts, sue, and be sued – the affect being that you can protect your personal assets from the risks associated with running a business. There can also be greater flexibility in terms of taxation with a company structure.
- The main disadvantage of a company structure is the cost of setting up the company and ongoing compliance with company law.
If your inner entrepreneur is dying to get out and you’re thinking about going into business for yourself, contact Complete Legal and Conveyancing today and we can talk you through the process.
