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When deciding on a structure it is important to consider the nature of your business including factors such as:

• Type of business
• Tax liability
• Ease of setup and set-up costs
• Asset protection

The following is a brief description of the various types of business structures available.

Sole trader

A sole trader is a business owned and managed by one individual who is solely responsible for the business' debts and legal obligations. Sole traders have minimal reporting obligations and relatively low establishment costs.

Partnership

A partnership is where between 2 and 20 people co-own a business and carry out the business activities together with a view to profit. The co-owners share in the business' assets, liabilities and profits in accordance with a partnership agreement, with the partnership agreement establishing partner responsibilities, entitlements to profits and share of business ownership.

Company

A company is a separate legal entity, that is, its owners are regarded as separate from the business. For this reason the business can change ownership and continue to run despite the original owners leaving the business. Further, the company owners have limited liability for the business' debts. Companies must be registered with the Australian Securities and Investments Commission (ASIC). Therefore the establishment costs can be high.

Co-operative

A co-operative is a jointly-owned commercial enterprise with at least five members who own and control the organisation. It produces and distributes goods and services and is run with the aim of meeting the needs of its members for the benefit of its owners. A good example of a co-operative is a farmer cooperative where there are a number of dairy farmers, for example, who join forces and sell their product under the same brand.

Incorporated association

An incorporated association is an inexpensive and a simpler structure for a small, not-for-profit community-based organisation. Such an association is set up under the Associations Incorporation Act 1984. Incorporation, similarly to a company, ensures the association is a separate legal entity from its members and hence members cannot be sued individually for their personal assets as their liability is limited to the capital they invested into the association.

Trust

The concept of a trust revolves around the idea of property being held by one party (the trustee) on behalf of another (the beneficiary). A trust can have tax advantages depending on how the trust is structured and may have a greater level of asset protection than other business structures.

Franchising

Franchising is when you pay fees and royalties to the parent company of the franchise in return for the right to sell the franchise's products and sell under the franchiser's well-known trade name.

For more information on the various types of business structures, visit:

• Australian Tax Office (ATO)
• NSW Small Business
• Business.gov.au
• Office of Fair Trading
• Australian Securities & Investments Commission