Whether starting a new business venture or introducing new co-owners, having a very well documented business structure and a clear understanding of how future events will be dealt with is essential for business success. Speak to our business structure lawyers today!
Each business structure has different benefits. Our Business Lawyers will explain your options and the structure they recommend for your particular circumstances. Having settled on the one best suited, they will document the structure clearly and concisely.
We are experts in preparing shareholder deeds, trust deeds, unit trusts, partnership agreements and limited partnerships: whether you are starting out, contemplating a re-structure or have grown out of your current arrangements.
Business Structures Explained
Choosing the right structure for your business is one of the most important decisions you will make as a manager or owner.
Australia’s four most common types of business structures are:
- Sole trader – The simplest structure allows you to have full control;
- Company – More complex, your liability is limited because it is a separate legal entity;
- Partnerships – Consisting of 2 or more individuals or companies sharing profits and losses;
- Trust – Where a trustee is in charge of a business operated for the benefit of individuals or other entities.
What is a Sole Trader?
A sole trader is an individual trades in his or her own name or under a business name. Even if trading under a business name, the legal entity conducting the business is the individual. The use of a business name does not establish a legal entity different from the individual, ie the sole trader.
What is a Partnership?
If two or more people carry on business together (other than through a company), the business is a partnership.
Frequently people do this without any written partnership agreement in which event in Queensland at least, the provisions of the Partnership Act apply. It is prudent however for the parties to carefully consider how they will want the partnership to operate and to enter into a Partnership Deed early on. Things that need to be considered include contributions to capital, contributions to expenses, division of profits, pre-emption rights to buy out the interests of a retiring partner and arrangements in the event of death or TPD of a partner and insolvency. Our expert Business lawyers can assist with all your requirements.
What is a Company?
A company (proprietary limited company) is the most common structure adopted by businesses in Australia. Most business people who choose a proprietary limited company as their trading vehicle do so for one or more of the following reasons:-
- the company is a legal entity in its own right;
- for a single shareholder company, it can have interests and pursuits that are different to those of the individual shareholder;
- for multiple shareholder companies, it represents the common interests of the several shareholders;
- each shareholder or class of shareholder can be allocated different rights within the company eg voting rights; rights to dividends; rights to capital;
- the personal assets of the shareholders are shielded from the consequences of its trading activities although often shareholders are required to give personal guarantees to lenders etc.
Trusts & Discretionary Trusts
The main advantage of a Discretionary Trust is that it allows an individual to distribute income from business activity to other individuals (“beneficiaries”), usually family members.
A Unit Trust is in many ways like a partnership because it is comprised of different “units” controlled by unrelated persons or entities who agree to carry on business together. It also has similarities in terms of governance and entitlements, to a company.
Whether you choose a company, partnership, trust or a joint venture some of the key issues that must be decided and recorded include:
- Who will decide on the day-to-day business operations?
- What decisions should all co-owners make?
- If a co-owner wants to leave the business, what should be the procedure for doing so?
- Is it possible to force a co-owner to leave the business?
Unit Holder Agreements
The Unit Trust will be constituted by a trust deed which is “settled” by a trustee. Most commonly the trustee of a Unit Trust engaged in business activity will be a company. The Unit Trust Deed is the equivalent of a company constitution.
Our business structure lawyers can expertly help you mitigate the risks associated with operating your business with sound advice as to the structure best suited to you.