If you have plans to start up a business, it is wise to consult with commercial lawyers first, because there are many things to consider and decide on. You can’t just go into business without first making sure it is done legally. One of the first things to decide is what type of business structure you will have for your business. Here are some of the main types: –
- Sole Trader. This is perhaps the easiest type of business to set up and as the name suggests, and may be suitable for a small carpet cleaning operation like Brilliance Carpet Cleaning Perth or something similar with only one person involved. You won’t have a partner or a company structure as such, however you will need an Australian Business Number (ABN). You may also need a business name and a trademark, both registered. A sole trader has full control over every aspect of the business, owning all the profits and all the debts.
- A partnership is also a relatively simple way to set up your business. Typically it will involve two or more people who are co-owners in the business. As such, they all share responsibility for profits and debts. The co-owners can act on behalf of each other in running the business. A written agreement is an essential component of this type of business, to ensure each partner understands their responsibilities. The ABN and other components similar to the Sole Trader are needed and if there is a silent partner, limited partnership formation is required.
- If you set up a company, it must be registered under the Australian Corporations Law as well as having an ABN and the other components of Sole Trader. There will be many shareholders in a company, but since it is a separate legal entity, neither they nor the owners will be liable for any of the company’s debts. A company is much more expensive to set up than either the Sole Trader or Partnership.
- Trust. A trust is where a trustee carries on business for other people’s benefit. The trustee can be a person or a company, while the people who benefit are referred to as beneficiaries. A trust needs to have an ABN and it may or may not have a registered trademark.
There are many advantages and disadvantages for each type of business, which is why consulting with legal professionals is essential before the decision is made. And of course you will need a lawyer to draw up the legal documents once you’ve decided which type is suitable for your business.
However, in the case of a Sole Trader where there is only one person involved, the process is much simpler and can be done online easily enough, especially where no trademark is being used. A registered business name is also optional, making it even easier.