All successful businesses depend on a solid and dependable structure. While you can always work it out as you go, improvisation in the business world is inefficient, highly risky, and likely to lead to failure. Getting the right systems in place from the start is very important, with structural integrity being one of the key issues that defines business success. With a well-balanced and defined structure, you can meet shareholders expectations, minimise disputes, and support long-term growth.
How to identify and choose an appropriate structure and make changes when necessary.
Common business structures
The following business structures are the most common. There are advantages and disadvantages associated with each model so you really have to understand your needs to know which structure is ideal for you.
– A sole trader describes an individual; there is only a single person responsible for all aspects of the business.
– A company is a legal entity that is separate from its shareholders.
– A partnership is an association of people or entities who run a business as a non-company entity.
– A trust is an entity that holds property or income for the benefit of others and can provide a high level of asset protection.
There are also a number of commercial arrangements that a business can enter into, including franchises and joint ventures, which have implications depending on the type of business structure used.
Choosing the ideal structure
Before starting a business, it’s important to understand the responsibilities of each structure before settling on an appropriate model. A business mentor who also works as an accountant is invaluable in this process. Not only do we have the expertise needed to understand the implications of this decision, we also have a working relationship with our clients and understand their circumstances.
Among other things, your business structure can determine how much tax you pay, whether you’re considered a business employee or the owner, the availability of asset protection and personal liability, the licences you require, and how much control you have over your business. All of these things are critical when analysing ongoing costs and paperwork for your business, along with the commercial implications for all stakeholders.
Changing business structures
While it’s crucial to understand business structures from the outset and avoid guesswork, you’re not locked into a structure indefinitely. You can alter the structure of your business as it changes or expands, with a business mentor able to advise you on the implications of such changes.
What is your business or venture trying to achieve? You need to identify and understand your obligations and consider the legal, operational, and business requirements for the industry you’re considering.
Whether you’re defining a new business structure or considering a restructure, it’s important to seek professional advice at the earliest opportunity. It’s never too early or late to implement these ideas, but it is important to seek professional advice.
General Advice Warning:
The information in this App is provided for information purposes and is of a general nature only. It is not intended to be and does not constitute financial advice or any other advice. Further, the information is not based on your personal objectives, financial situation or needs. You are encouraged to consult a financial planner before making any decision as to how appropriate this information is to your objectives, financial situation, and needs. Also, before making a decision, you should consider the relevant Product Disclosure Statement available from your financial planner.