Business Start Up Lawyers | Sydney | Advice on Establishing a Business

Our Business Start Up Lawyers will help you get it right from the start

When establishing a business, it is important to choose a business structure that best suits the personal and financial circumstances of the owner or owners. This is a decision requiring an analysis of the nature of the business, the role that each owner will undertake in the management of the business, the legal framework of the particular sector within which the business will operate, the projected profits and the known risk factors.

Our Business Start Up Lawyers can assist in all aspects of business establishment. We assist clients in choosing the appropriate business structure and preparing the necessary documents and registrations.

The four most common business structures are sole trader, company, partnership and trust.

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A company is a more complex business structure to establish and maintain, and involves higher set up and running costs than other structures. Unlike a sole trader or partnership, a company is a separate legal entity which can incur debt, sue and be sued, and the money earned by the business belongs to the company.

Companies are owned by shareholders who are not liable (in their capacity as shareholders) for the debts of the company. Directors of a company control its business operations and may be held personally liable if found to be in breach of their legal obligations as directors.

Companies and directors have key legal and reporting obligations including:

updating the Australian Securities and Investments Commission (ASIC) within 28 days of key changes to company details,
keeping accurate financial records of the company,
lodgement of annual company tax returns with the Australian Taxation Office (ATO),
compliance with all director duties and obligations under the Corporations Act 2001 (Cth),
an annual declaration of solvency, and
registration for goods and services tax (GST) where turnover is $75,000 or more ($150,000 for non-profit organisations),

Companies generally suit people who expect their business income to be highly variable and want the option to use losses to offset future profits.

Sole trader

A sole trader is the simplest, lowest-cost business structure and is relatively easy and inexpensive to establish. Sole traders are individuals running businesses who:

- have full control of the business and its assets,
- are entitled to all the business’s profit,
- have fewer reporting requirements than other business structures,
- are able to use their individual tax file number (TFN) to lodge tax returns, and,
- do not require a separate business bank account, but,
- bear personal (legal) responsibility for all aspects of the business, and,
- face unlimited liability for business debts including the potential loss of all their personal assets.,

A sole trader structure is often used for businesses with an expected turnover less than $120,000.00 where strong growth in revenue is not anticipated.

Partnerships

Our Business Start Up Lawyers will assist you with an appropriately drafted Partnership Agreement. A partnership is a business structure made up of two or more people who distribute income or losses between themselves. Partnerships are relatively easy and inexpensive to set up and have minimal ongoing reporting requirements.

There are 3 main types of partnership:

- General partnership: where all partners are equally responsible for the management of the business, and each has unlimited liability for the debts and obligations of the partnership.
- Limited partnership: made up of general partners whose liability is limited to the amount of money they have contributed to the partnership. Limited partners are usually passive investors who do not play any role in the management of the business.
- Incorporated Limited Partnership: where partners can have limited liability for the debts of the business provided that at least one general partner has unlimited liability.

Each of the partners must have a separate tax file number and each partner pays tax on the share of the net partnership income they individually receive. The partnership itself does not pay income tax on the income earned.

Partnerships are required to:

- have an Australian Business Number (ABN) used for all business dealings,
- lodge an annual partnership tax return with the Australian Taxation Office (ATO), and
- register for GST if turnover is $75,000 or more.

Partnership laws in New South Wales are governed by the Partnership Act 1892 (NSW).

Trust

In a trust structure, a trustee holds the business for the benefit of others (the beneficiaries). The trustee:

- can be a person or a company,
- is responsible for everything in the trust, including the operation of the business and its income and losses, and
- decides how business profits are distributed to the beneficiaries.

Trusts are complex and expensive to set up and operate. A formal trust deed outlining the operation of the trust is required and the trustee must undertake formal annual administrative tasks. Once established, trusts can be difficult to dissolve or alter.

A trust structure is generally used to protect business assets for beneficiaries.

We recommend obtaining legal advice from our Business Start Up Lawyers before taking any steps to establish a trust.

Disclaimer

The information provided above is not to be taken or relied upon as legal advice and Jason Francis Commercial and Construction Lawyer will not be responsible for decisions made or acts or omissions undertaken in reliance on this information. It is information intended as a guide only. You should obtain independent legal advice in respect of any issue or query you may have after reading this information.

Liability limited by a scheme approved under Professional Standards Legislation.

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Martin Wilson

CAVALIER GOLD PTY LTD

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FARFIELD EAST

Jason helped me with a difficult court matter which posed a real threat to my horse-training business. Thanks to Jasons professional and thorough preparation, I achieved a great outcome and my business was able to continue unaffected.

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HAT CREEK PTY LTD

I was in a very critical situation with a building company wanting money that was not owed to them. Jason was very understanding & professional in attempting to negotiate with the Company. I had a great deal of confidence that he would provide a positive outcome. I would recommend Jason highly to anyone dealing with a difficult situation in Commercial or Construction Law

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