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Choosing the right business structure

By CCIWA Editor

There are many ways to structure your business. What you choose will obviously depend on the size and type of business you are in, along with how fast you expect to grow.  

Structure can impact on licences, tax rates, whether you are considered an employee or owner, and your personal liability and level of control in the business.  

Which of these will work best for you? 

  • Sole trader: The simplest and easiest to set up, with few reporting requirements. You bear sole legal responsibility.
  • Partnership: Can be general (where all partners are involved in day-to-day management) or limited (at least one general partner, who is personally liable for business debts, and limited partners who contribute capital but are not liable). It has some tax advantages.
  • Company: A separate legal entity that can incur debt, sue and be sued. Set-up and ongoing costs can be significant.
  • Cooperative: A separate legal entity owned and run by at least members who five have equal voting rights. Formed to provide a service, rather than return on investment for members.
  • Trust: Operated by a trustee on behalf of trust members. A trustee may be an individual or a company.

To keep costs down — and assuming the business does not expose the owner to a high risk of being sued — it may make sense to start as a sole trader, or partnership.  

Once significant income is involved you may consider transitioning to a company.  

Some businesses are structured to allow assets (such as intellectual property and domain names) to be owned separately to the operating company, so they are protected if the operating company fails.  

Your structure is not fixed and can be changed as required. Bear in mind, your structure is not fixed and can be changed as required.  

The next major step is developing a business plan. It not only helps you sell your ideas to others to secure finance, it also forces you to clarify your ideas and tease out potential pitfalls. 

Visit the Small Business Development Corporation website for more information on each structure. 

There are many ways to structure your business. What you choose will obviously depend on the size and type of business you are in, along with how fast you expect to grow.  

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