9AM – 5:30PM

Monday to Friday

L7, 10-14 Smith St

Parramatta NSW 2150

(02) 9635 7966

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We are leaders in commercial, private client, and government law

中文     15th December 2018

9AM – 5:30PM

Monday to Friday

L7, 10-14 Smith St

Parramatta NSW 2150

(02) 9635 7966

Call Us

Structuring Advice

The choice of entity in which to conduct a business can have profound legal and taxation consequences.

Our commercial law team at MatthewsFolbigg are ready to advise you on the appropriate structure for your business.

What is a sole trader?

A sole trader is an individual who carries on a business. No separate legal entity is formed, so the personal assets of the sole trader are at risk in the event of business failure.  There are few formal registration requirements, although a sole trader should:

  • register his or her business name (if the business is conducted under a name other than the sole trader’s personal name)
  • register for an ABN and tax file number, and possibly also register for GST
  • obtain any licences, permits or registrations necessary in their industry, trade or profession

What is a company?

A company is a separate legal entity, with limited liability protection for its shareholders. To establish a company, you must:

  • apply for registration with ASIC
  • adopt a constitution or the replaceable rules set out in the Corporations Act
  • have at least 1 member and 1 director (who has consented to act)
  • register for an ABN and tax file number, and possibly also register for GST
  • obtain any licences, permits or registrations necessary in the industry

What is a trust?

A trust is an arrangement where:

  • certain property (the trust property)
  • is held “on trust”
  • by one party (the trustee or legal owner)
  • for the benefit of another person or persons (the beneficiary/beneficiaries)

A trust is not a separate legal entity.  The assets of the trust are legally owned by the trustee, who is under a duty to act in the best interests of the beneficiaries.

The two main types of trusts are unit (fixed) trusts and discretionary trusts.

  • in a unit trust, the unitholders have fixed proportionate interests in the net assets of the trust
  • in a discretionary trust, the trustee has discretion as to who to distribute the income or capital of the trust, and in what proportions or amounts.

In order to establish a trust, there must be:

  • a settlor (the party contributing the trust property)
  • trust property (also known as the trust fund)
  • a trustee (it may be a corporate trustee to limit liability)
  • a beneficiary/beneficiaries or class of beneficiaries
  • ideally a trust deed to document the terms of the trust (stamp duty may be payable)

The trust should also register for an ABN and tax file number, and possibly also register for GST.

What is a partnership?

A partnership is a group of individuals or companies who carry on business in common with a view to a profit. A partnership is not a separate legal entity, and partners are jointly and severally liable for the debts of the partnership (unless it is a limited liability partnership). There are statutory limits on the number of partners a partnership may have.

There are no specific registration requirements which apply to the formation of a partnership. However, partners are advised to have a written partnership agreement (as discussed below).

Which structure is best for me?

This will depend on the circumstances of your business.  Factors to consider include:

  • asset protection and liability
  • distribution of profits/income and taxation
  • management control and flexibility
  • succession planning
  • establishment and compliance costs
  • regulatory ‘red tape’ and professional/industry requirements

When conducting a business with other owners (whether as shareholders, unitholders or partners), it is best to have the common understanding of the parties documented in the form of a shareholders’ agreement, unitholders’ agreement or partnership agreement.  The purpose of these agreements is to set out the rights and obligations of the parties and to minimise the potential for future disputes.

How can we help?

MatthewsFolbigg’s commercial law team are ready to advise you on the optimal legal structure for your business. Our written advice will be tailored to your particular needs.

Please contact our commercial law team today for assistance with your business.

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We serve all of the legal needs of individuals, government and businesses, regardless of their complexity, throughout all of Sydney and beyond.

We are industry leaders, and we never lose sight of the outcome that you want. We guide you through the legal process to achieve that outcome.

Our growth and our success, comes from the growth and success of our clients.

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