The first step to starting or buying a business is the selection of the correct structure within which to operate the business. It is important that you understand the structure, how it works and the legal obligations that come with the chosen structure.

When selecting your structure many considerations need to be taken into account the:

• Capital Gains Tax (CGT) implications at the time of sale
• business ownership and personal debt
• expected business income
• tax effect on personal income
• complexity of the structure and associated costs of running it
• reporting requirements and associated costs
• level of exposure to creditors and maximisation of asset protection
• level of acceptable risk to personal assets
• maximising of tax benefits and minimising of taxes payable

Essentially there are four business structures considered by small businesses:

Sole trader

An individual who carries on the business

Partnership

Two or more people or entities carry on a business together

Company

An entity that is separate from its shareholders

Trust

A business structure where a trustee (usually a company) controls all the assets of the business and carries out the business on behalf of the beneficiaries of
the trust. The trustee distributes income and makes decision about the business.

The correct choice of business structure is important as it has an impact on who can make important decisions, tax advantages and disadvantages, how profits and losses are shared, legal obligations and costs. It is possible to change your structure as your business undergoes changes or experiences growth so choose what’s best for you now.

Understanding the differences between these structures and choosing what’s best for your business can put you in the most favourable tax and legal position.

We at Carmelo Mirabile & Co have the expertise and experience to review your situation and advise you in the selection of the correct structure for you. Call us on (03) 9736 1877