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Before you can begin any of the admin set-up for your business, you need to decide on a business structure. As I was getting into business with two other people, I went the extra step and sought advice from a business accountant to ensure I picked the best structure for the business, and everyone involved. It isn’t always necessary to seek out professional advice as there is a lot of information online to help you make an educated decision for your business. Here in Australia, the government has a lot of free information available to help you get started.
I’m not sure what the international equivalents are, but here is Australia the government has set up a website specifically for business set up: business.gov.au I used this website to help me gather information prior to verifying my decision with my accountant – it is a nugget of gold, so definitely take advantage of all the free information there.
The four main business structures in Australia are:
In Australia you can also create a business structure as a Co-Operative, Joint Venture or Indigenous Corporation.
There are pros and cons to every structure, and not all of there are suitable to all business types. The reason there are different structures are to create different ways to manage finance, tax, and accountability within business. Each structure allocates the tax and accountability differently, has slightly different legal and reporting requirements and can create different protection measures for the individuals or the business. Take the time to read through each one and determine what structure best suits your business context.
In my business, we decided to form a company. The reasons for this are it allows us each to keep our personal assets as separate to the business. What this means in application is our personal assets, (such as cars, houses, or other investments) are seen as separate to the business. Regarding the taxation structure, a company means that our personal and company taxation is completed separately. This structure also allowed us to allocate business ownership as we determined amongst ourselves through the distribution of shares.
Some of the other aspect of running a company means that we have more formal legal and reporting requirements, one of those being a requirement to have WorkSafe Insurance (based on Victoria’s legal requirements). With each of us being a ‘director’, we are accountable for the business and any debt and legal requirements incurred by the business. We also had to register ourselves as employees of the business to receive wages.
There are many other aspects to setting up the business as a company. I have just listed the ones that were most significant to my decision making. In your business the other business structures may prove more financially or legally beneficial to your circumstances.
The reason for deciding on a business structure is so that you can formally register your business. To apply for an Australian Business Number (ABN) you need to decide on a business structure so that the government has a record of the relevant taxation and legal responsibilities of your business. For my business with a ‘company’ business structure, I applied for an Australian Company Number (ACN) alongside my ABN. Regardless of whether you start with the ABN or ACN, registering for either of these numbers registers your business name so that it cannot be used by another (note: this is not the same as a trademark). From there, you can also apply for a separate Tax File Number (TFN) if it is needed in your chosen business structure.
I hope this information has provided you with insight regarding the purpose of a business structure and where you can source information to make the best decision for your business.
Thanks for reading! Make sure to leave a comment and let me know what point stood out to you the most.
I look forward to seeing you here again!
Disclaimer: I am not a business advisor and have not provided specific business advice as business is a diverse field full of unique contexts and situations. I will show you where I sourced information and how I made my decision, but it is up to you to determine whether you need professional advice for your business situation.