If you want to start a business, you will need to determine which business structure to use. Our Momentum Financial Group team explain some of the benefits and disadvantages of different business structures.
A sole trader is the simplest business structure – just one person owns this business. There are several advantages of being a sole trader. The ease of setting up, minimal paperwork required, low costs and flexibility in decision-making. However, as a sole trader, you are personally liable for any debts or losses incurred by your business. This can be a disadvantage if running your business involves high risk.
A partnership involves two or more people who share ownership and responsibility for running the business. A partnership provides financial assistance and additional skills to help grow the business. As with a Sole Trader, setting up a Partnership business structure can be relatively easy, although there may be a little more paperwork involved than with a sole trader. It also has the disadvantage of increased liability, as all partners are legally responsible for any debts or losses the business incurs.
A company is an incorporated business structure and involves the formation of a separate legal entity owned by shareholders. It provides limited liability to its owners, meaning that each shareholder’s personal assets remain separate from the company’s, and they cannot be held liable if the company incurs any debts or losses. This can make it an attractive option for businesses with higher levels of risk involved. Still, it can involve more complex administrative requirements and additional costs incurred in setting up and running the business.
A trust is a legal structure that allows the business’s assets to be managed and controlled by trustees on behalf of the beneficiaries. It can provide flexible control over the assets and limit liability for potential risks. However, it may involve more complex setup processes than some other business structures, and running a trust often involves additional costs.
No matter which type of business structure you choose, it’s essential to understand the benefits and drawbacks. This will allow you to make an informed decision that best suits your needs. Be sure to reach out to our Geelong expert accounting team for sound advice when making significant decisions about your business structure.
Our Momentum Financial Group team are available Monday to Friday in Geelong, contact us online or give the team a call on (03) 5222 6688 to get more information or to book an appointment to discuss the business structure that is right for you.