Which Business Structure is appropriate?
Deciding which business structure is appropriate is nearly always a vexed question. There is a need to get a balance between –
- asset protection
- control of assets
- tax implications.
All four factors need to be considered in the light of your aims and the nature of your business. You may well start off as a sole trader and then incorporate if you are in business with others you can be a partnership or a company or a trust structure or a combination of both. In such circumstances you should have a partnership or shareholders agreement.
- It is a high-risk business?
- Does the activity involve the acquisition of an appreciating asset?
- Does it involve the conduct of a trade or business?
- What is the form of income to be generated (dividends, interest, business income, capital gains)?
- What are the financing requirements and how is any security to be provided?
You will need to involve your accountant as the tax implications of the various structures are significant especially in relation to capital gains tax exemptions.