Surprisingly, we have had quite a few new businesses being setup in the last month. Most of these need careful structuring in the current economic environment, and it is not always about the best tax result.
Whether you are setting up a new business, reacting to the current economic situation, or perhaps experience a growth phase, you will be faced with choosing an appropriate structure.
The type of structure you decide on will impact such areas as legal risk, tax obligations, asset protection and the cost of the setup.
There are many business structures available, however most small businesses come down to just these four.
Sole Trader
Partnership
Private Company
Discretionary Trust
These four structures each have their advantages and disadvantages, and it is very important to understand these before moving forward.
There are important questions to ask prior to making any structuring decision, these include both short term and long term issues.
Consider the goals that you have for the business, both now and at least five years down the track
Consider the end goal for the business. Is it for a cash flow stream long into the future, or perhaps to grow something that can be sold in the short to medium term.
What are the tax consequences of the structure you choose, will short term losses be claimable, are there beneficiaries to whom distributions can be paid, will the entity accumulate cash for other business ventures?
The cost of setting up a structure, and then maintaining it is very important. Check that you understand the cost of tax compliance issues for each structure.
Everyone is concerned with growing their wealth over time, and the structure you choose should afford you sufficient asset protection so that your wealth is not lost through adverse business events.
We provide a range of resources to assist you with selecting the most appropriate business structure for your needs.
So is 2021 is going to be your year, then speak to us soon so that we can help you with your business journey.
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