Business Structuring & Asset Protection

Understanding the types of business structures available before starting a new business is crucial. At Ivy Law Group, we can help you understand the different structures that may be available and appropriate for your business, and how each one is reflective on your business model and eligibility.

The four most common business structures in Australia are:

• Sole trader
  As a sole trader, you operate the business as an individual and are solely legally responsible for the business, inclusive of all debts and liabilities. Whilst it is possibly the most cost effective and easiest structure to set up and especially appealing to a single person business, it does not easily accommodate for future growth or allow for flexibility within this structure.
  
  
• Partnership
  A partnership consists of two or more individuals or entities that agree, usually by way of a partnership agreement, to conduct a business together. The partnership agreement between parties governs how the partnership operates, but usually partners distribute income or losses between themselves. Notwithstanding, there are different types of partnership that can be considered to determine the most suitable partnership for you. These include:
  
  
  • General Partnership – where all partners are equally liable, and their liability is unlimited in respect of their debts and obligations;
  • Limited Partnership – where the liability of the general partners is be limited to the amount of their contribution to the partnership; and
  • Incorporated Limited Partnership – where partners can have limited liability provided there is at least one general partner with unlimited liability.
    
    
• Company
  As a separate legal entity, a company structure is ideal for individuals or entities considering the prosperity and growth of their business. This is especially because a company in its own legal capacity has the same rights as a natural person and therefore, the members of company are not personally liable for the company’s debts and obligations. A company is regulated by the Corporations Act 2001 as well as a constitution or replaceable rules (if any), while the relationship of its members or shareholders is governed by a shareholders agreement.
  
  
• Trust
  A Trust is a business structure where the trustee holds property or income for the benefit of its beneficiaries. Trust structures can sometimes be simple to set up, but mostly it is a complicated structure to establish. However, Trusts prove to be an appealing structure for the purposes of asset protection and minimisation of individual risks. The trustee of a Trust, an individual or entity, is the one responsible for managing the Trust on a regular basis for the life of the Trust, as well as distributing income and/or capital of the Trust to a variety of beneficiaries, sometimes in their discretion depending on the way the Trust is set up.