SHOP LOCAL: Chose structure that suits your business

Local Business Matters

David Eaton – WA Small Business Commissioner

Choosing a structure that will best suit the needs of your business is one of the most important decisions you will make.

Your decision will determine how and when you pay tax; your personal liability; your ability to raise money and the amount of reporting and paperwork required.

You are not locked into a structure for the entire life cycle of your business.

You can review and change your structure as your business changes or grows.

The four most common business structures in Australia are sole trader, company, partnership and trust.

When determining which business structure might be suitable for you, consider the following:

• Tax implications – your business structure will determine how and when you pay tax and whether or not you can claim any tax free thresholds.
• Personal liability – it is important to have a good understanding of the level of risk associated with your business activities.Some businesses by their very nature can carry a high level of risk such as transportation, construction and manufacturing. Other businesses may not be as risky. However, when you are providing goods and/or services or employing people you will need to think about what might happen if things don’t go according to plan. If you incur debts or are sued, does your business structure limit your personal liability? If not, you could potentially lose any personal assets you own, such as your home, to cover any costs incurred.
• Raising funds for your business – some grants and capital raising ventures will not support certain business structures, such as sole trader. If you intend trying to raise capital for your business, you may need to factor this into your decision in relation to your business structure.
• Reporting requirements – some structures, such as being a company, have rigorous reporting requirements which you will also need to factor into your decision.

It is highly recommended you obtain business, financial and legal advice before deciding on the business structure which will best suit your circumstances and protect your assets.

The Small Business Development Corporation is here to help.

We have lots of information about business structures on our website, and also cover the topic in our ‘Starting a Business’ workshop.

Learn more by visiting smallbusiness.wa.gov.au or contact one of our experienced business advisers on 13 12 49.