Blurb - Introduction to Entity Structures

There are four main types of entities you can choose from when setting up a business:

Sole Trader – Simple – You trade under your own name, are fully entitled to profits, and carry full legal liability.

Partnership – Simple – You trade with one or more partners, share profits, and share full legal liability. Yes, full—if your partner can't pay their share of the debts, the responsibility falls back on you.

Trust – Complex – You trade through an entity that distributes profits either at a fixed rate or at the discretion of the trustee. Depending on how it's set up, you may have full or limited legal liability.

Company – Complex – You operate through a separate legal entity, retain control over it, but are not personally entitled to profits. Liability is limited, provided the company remains solvent.

Sounds simple, right? Not quite.

There are five key factors to consider when choosing the right structure for your business:

• Ease of Administration – Including setup and ongoing costs

• Liability – How well your personal assets are protected

• Succession – What happens to the business if you leave or pass on

• Taxation – Such as income tax, capital gains tax, and other applicable taxes

• Purpose – Whether you're running a for-profit or not-for-profit entity

These are the main considerations, but they're not the only ones. Your choice might also depend on where your business is in its lifecycle—are you just starting out, in a growth phase, well-established, or looking to wind things up? And what are your key goals: reducing tax, protecting assets—or both?

If you'd like a quick chat about your business structure and whether it still meets your goals, feel free to reach out.

Disclaimer: The information in this blog is general in nature and is not intended as advice. Please do not rely on it. Business structuring is a complex area that requires tailored advice based on your specific circumstances.