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At CLO Lawyers, we specialise in providing expert business and commercial legal advice to support the growth and success of your enterprise.
Based in Toowoomba, our dedicated team of commercial business lawyers understands the unique challenges faced by franchisees, small business owners, multi-generational enterprises, and corporations. We tailor our services to meet your specific needs and priorities, ensuring you receive the trusted guidance required to navigate today’s complex business landscape.
Contact us today to make an appointment with one of our business and commercial lawyers for a personalised consultation to discuss the best business structure for your needs.
Business Structures
Choosing the right business structure is one of the most important decisions for your enterprise. It must align with your current and future goals. Factors to consider include:
- Asset protection
- Income tax and capital gains tax minimisation (working in conjunction with your Accountant)
- Administration costs (initial and ongoing)
- Adaptability to change
- Control
- Succession planning
While you can change structures as your business grows, it can be complex. Starting your business in the correct structure for your situation can save money in the future.
CLO Lawyers will collaborate with you and your accountant to recommend the best structure for your situation, considering each option’s advantages and disadvantages, tax implications, legal liabilities, and capital availability. We will also guide you on asset protection to safeguard your assets from creditor claims.
Contact CLO Lawyers today to make an appointment with a member of our business and commercial team to discuss your business legal requirements.
Common Business Structures
Below are four common business structures:
Sole Trader
A sole trader structure is simple and inexpensive to set up, with minimal compliance requirements. As a sole trader, you manage the business under your name and lodge tax returns using your individual tax file number.
If you are a sole trader in a high-income tax bracket, all income earned by you from various sources, including your business profits, will be taxed at that high rate.
There is no legal separation between you and the business, meaning you are personally liable for all business debts. This structure can be inflexible for growing businesses.
Partnership
A partnership involves two or more people or entities conducting business together and sharing income or losses. It’s simple and cost-effective to set up. Control is shared, and a partnership agreement is recommended to outline operations.
Partners are jointly liable for business debts and obligations, making it crucial to carefully select your partners. The partnership must be reconstituted if a partner enters or exits.
Company
A company structure is ideal for business growth but comes with higher setup costs and ongoing administrative requirements.
A company is a separate legal entity, offering limited liability to its shareholders and some personal protection for directors. This structure suits high-risk businesses.
Ownership is flexible, and shareholders can easily transfer their interests. A shareholders’ agreement is advisable if there are multiple directors.
Trust
In a trust, a trustee holds property or income for the benefit of beneficiaries, operating under a formal trust deed. The trustee, whether individual or corporate, is responsible for the trust’s operations and liabilities.
Trusts are less suitable for businesses needing to retain profits for growth, as they must distribute income or face high tax rates. Trusts allow flexibility that other structures do not have and can be helpful for family businesses that require discretion distributing the profits each financial year.
Business Asset Protection
CLO Lawyers offers expert services to help you protect your valuable assets from potential risks, liabilities, and legal claims. Our goal is to ensure that your personal assets are insulated from the uncertainties of business trading activities.
The best asset protection strategy will depend on your circumstances and requirements. The critical asset protection component creates a barrier between your personal and professional life and divides your assets accordingly.
CLO Lawyers’ business and commercial team will advise you of available options and identify the best strategy to protect your assets.
What is Business Asset Protection?
Asset protection involves using strategies and legal mechanisms to safeguard your assets from risks, such as legal claims, creditors, or financial difficulties.
These strategies are particularly valuable if you own significant assets, work in a high-risk profession or engage in activities that could lead to legal disputes.
Our Approach:
At CLO Lawyers, we believe that the best asset protection strategy is tailored to your specific circumstances and needs.
Our experienced business and commercial team will work with you to identify the most effective solution to protect your assets.
These strategies typically involve creating a barrier between your personal and professional life and separating your assets accordingly.
Common Asset Protection Methods:
Legal Entities
Companies and trusts (with a corporate trustee) can provide enhanced personal asset protection compared to sole trader and partnership structures.
Insurance
Comprehensive insurance coverage can shield your assets from various risks, including property damage and liability claims.
Estate Planning
A well-structured estate plan ensures your assets are distributed according to your wishes and provides additional protection.
Principal Place of Residence & Future Planning
Transferring personal assets, such as your family home, to a spouse not involved in the business can protect these assets from business-related claims but there are timeframes and potential clawbacks.
Professional advice is recommended to understand the tax implications and potential clawback provisions.
Understanding the best person or entity for future asset purchases is also a crucial consideration for business owners from an asset protection point of view.
Superannuation
Contributions to a superannuation fund are generally protected, as they are held for retirement purposes.
Our team at CLO Lawyers is here to guide you through the available asset protection strategies to safeguard your assets from potential claims.
Business Structuring & Asset Protection FAQ: Frequently Asked Questions
Asset protection involves using strategies and legal mechanisms to safeguard your assets from risks, such as legal claims, creditors, or financial difficulties. These strategies typically include creating a barrier between your personal and professional life and separating your assets accordingly.
The best asset protection strategy will depend on your circumstances and requirements. Using companies and trusts (with a corporate trustee) can provide enhanced personal asset protection compared to sole trader and partnership structures. A family trust (discretionary trust) is often considered the most effective option.
No asset protection strategy will provide an absolute guarantee, but steps can be taken to minimise the chances of catastrophic loss of assets on the failure of a business.
Companies and trusts (with a corporate trustee) can provide enhanced personal asset protection compared to sole trader and partnership structures. A company is a separate legal entity offering limited liability to its shareholders.
Transferring assets into a discretionary trust provides flexibility and control over assets while offering asset protection benefits.
Asset protection strategies include:
- Legal Entities
Companies and trusts (with a corporate trustee) can provide enhanced personal asset protection compared to sole trader and partnership structures.
- Insurance
Comprehensive insurance coverage can shield your assets from various risks, including property damage and liability claims.
- Estate Planning
A well-structured estate plan ensures your assets are distributed according to your wishes and provides additional protection, including protection of assets for the next generation from claims from personal creditors and matrimonial disputes.
- Superannuation
Contributions to a superannuation fund are generally protected, as they are held for retirement purposes.