A common question we are asked when clients are starting a new business or even after operating for some time, is what is the best business structure for my new business, or is my current business structure the most suitable for my business position?
One of our Client Managers, Tamara Flemming explains, “There are several different business structures to choose from when starting a new business. Each structure has its own advantages and disadvantages, and the right choice depends on your specific needs and goals.
“It’s important to have a relationship with your accountant, or to choose a firm with the experience and ability to guide you through your business growth.”
The most common business structures are:
1. SOLE TRADER
A sole trader is the simplest business structure, where one person owns and operates the business. This structure is best suited for small businesses with low-risk operations, and the owner is responsible for all debts and liabilities of the business.
2. PARTNERSHIP
A partnership is a business structure where two or more people share ownership of the business. Each partner is responsible for their share of the business’ profits and losses, and personal liability is shared between partners.
3. COMPANY
A company is a separate legal entity from its owners, and it can have multiple shareholders. This structure offers the most personal liability protection, but it also involves more legal requirements, such as annual reporting and compliance with company laws.
4. TRUST
A trust is a business structure where a trustee holds property or assets on behalf of beneficiaries. This structure is best suited for businesses that involve holding assets or property, and it can provide tax benefits to the beneficiaries.
5. NOT FOR PROFIT ORGANISATION
A not-for-profit organisation is a tax-exempt entity that exists for charitable, educational, religious, or other noncommercial purposes. Not For Profits are governed by a board of directors, and any profits are reinvested back into the organisation.
“It’s important to consult with an accountant or other professional to determine which structure is best for your specific situation. Having the guidance of an experienced accountant will help you understand the best options,” recommends Tamara.
At Coutts Redington, we focus on you and your business to provide guidance and direction for you to build a stronger business.
Main image: Tamara Flemming, Client Manager at Coutts Redington.
Image credits: Supplied.
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