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Blog Author: Terri Pattio
Plans for starting a business inevitable include the business structure at some point – what legal entity will the new company stand for. In most cases the decision will be based on tax consequences and the responsibility that you as the entrepreneur are willing to take. Let’s explain the ups and downs of a sole trader, partnership, company, and trust business structures.
A most basic form of business legal entity, this structure has the same person as owner and general manager. As such you will use your own Tax File Number, but will also have to register an Australia Business Number (ABN) and Goods and Services Tax (GST).
It is a structure that involves two or more partners, people or legal entities that operate a business on with a common goal. Equity interests however may be equal or different. Partners’ share in profits and losses in in accordance with their partnership equity and the agreements that hold the structure.
A company represents a legal association of people that are bound by the purpose of operating and financing business operations. The company formation starts with registering with the Australian Securities and Investments Commission (ASIC). This entity separates business owners (shareholders) from people responsible for business operation (management and employees). Above all, a company can own property, conduct and be a subject of legal actions.
Unlike a company, a trust does not have a separate legal personality. In a nutshell, it is an obligation imposed on a person to hold property or income for the benefit of others, called beneficiaries. The trustee conducts all transactions, which respectively become the trustee’s personal obligations.
All in all, there is no perfect and universal structure that would cater to all requirements of a business model. The best one can do is to find as tighter fit as possible.
Dan Radak is a web hosting security professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of online security, closely collaborating with a couple of e-commerce companies.
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