There are various types of entities you can choose to operate a business. The business structure you should choose will depend on various factors, such as:
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Industry of your business;
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The risks associated with your business;
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How much personal assets you own;
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Whether you have asset protection structures in place;
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Potential growth of your business and future plans
Some of the most common ways to operate a business, if you are the principal of the business, is as a sole trader, through a proprietary limited company (where you will be the sole director and or shareholder), or through a family trust. If you have a business partner who you share responsibilities with, you may wish to incorporate a proprietary limited company (where all partners will be shareholders), form a partnership, enter into a joint venture agreement, or create a unit trust. Depending on the type of business you wish to conduct, an Association or a public company limited by guarantee may also be suitable.
Our commercial lawyers will be able to assist you in explaining the difference between the structures mentioned above, and suggest which structure will most suit your circumstances from the legal prospective. As the taxation consequences will be a key area of concern when choosing your entity, we also suggest that we work closely with your accountant to achieve the best possible results for you.
Once you have chosen a structure, Prime Lawyers will be able to draw up all of the necessary paperwork to give effect to it including ASIC Forms, Constitutions, Trust Deeds and Minutes of Meetings. If you have chosen to incorporate a company, the company will be assigned an ACN (Australian Company Number) by ASIC, which is a nine digit number unique to your company.
If you are required to register for GST (i.e. if your GST turnover is more than $75,000 or $150,000 for a non-profit organisation), you will also need to apply for an ABN (Australian Business Number). ABN is an eleven digit number unique to that entity that is provided by the ATO. If you apply for an ABN at the same time as incorporating a company it is likely that your ABN will be two digits followed by your ACN however they are unrelated and issued by different government departments. You will need an ABN regardless of whether you are a sole trader, company, trust and so on.
You will also need to choose a name for your business. This may or may not be different from your (or the trading entity’s) name. For example, John Smith may operate a business called “John Smith” or “Smith’s Wine Shop”. John Smith may incorporate a company called “Red and White Smith Pty Ltd” to be the trading entity, and that company may operate a business called “Smith’s Wine Shop” or “Red and White Smith”. If you choose your business to be called something other than the name of the entity that is trading, you must register that name as a business name. You can do so at the Office of Fair Trading (in NSW).
Registering a business name will give you the right to operate a business in that name. Business names are regulated State by State which means that if you have a business name registered, generally, no one else in that State will be able to operate a business in the same name.
If you would like to speak with one of our commercial lawyers, please contact us on (02) 9521 2222. You can also email your enquiry online now and we will contact you shortly.