Good business structures should be effective in:
- Protecting your assets
- Minimising your income tax and capital gains tax
- Simplifying your administration
- Achieving your retirement objectives
- Achieving your estate planning objectives.
The right business structure for your situation will depend on a number of considerations. The most important are usually:
- asset protection, and
- the ability to reduce the overall tax rate.
The degree to which asset protection is important to you depends on the type of business you are in, or going into.
For example, it will be more important to protect your other assets (business and personal) the higher the possibility your trading business could incur liabilities for:
- events not covered by business insurances
- financial failure, or
- occupational health and safety
In such a situation, trading as a sole trader or partnership of individuals would not be considered a suitable legal structure, as your assets would be exposed to unsecured business creditors.
The general principle is that trading activities are best carried out by a trust, company or a partnership of trusts, and their assets should be confined to core trading assets only, and other assets held by other legal structures.
Thanks to our expert contributor
Along with the JPAbusiness team, the advice in this blog and cheat sheet was provided by business consultant and management accountant Richard Cummins in our free eBook, How to choose the right structure for your business.
Richard has been helping his clients structure their businesses so as to maximise asset protection and minimise income tax for almost 40 years. We have worked with Richard for many years and have great respect for him and the wealth of knowledge he has accumulated in this area.
If you would like advice about choosing the most effective structure for your business, contact the team at JPAbusiness on 02 6360 0360 (Orange) or 02 9893 1803 (Parramatta) for a confidential, initial discussion.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.