An important decision to make before you start a business is what structure your business will run under. This will reflect into all facets of your business, so you should spend time understanding the implications of each structure.
Sole Proprietorship
- You have complete control of your business.
- Your business assets and liabilities are not separate from your personal assets and liabilities.
- Personally liable for debts and obligations of the business
- Low-cost structure
Partnership
- Share control and management of business
- Each partner pays tax on the share of net partnership income each receives
- Minimal reporting requirements + Inexpensive to set up
- Requires more documentation
Company
- Separate legal entity from its owners – all profit, tax, and legal liability is directly to the corporation
- Members not liable for company's debt (only liable if you breach legal obligations)
- Complex business structure + Extensive documentation and record-keeping
- Wider access to capital
Trust
- Expensive set-up and operation
- Formal trust deed outlining operation required
- Trustee responsible for yearly administrative tasks
