Starting a business or firm in Cairns can be an exhilarating and busy time, but it is crucial to set up correctly from the beginning, it will save you many headaches down the line. A great place to begin is by gaining an understanding of the structure options and what each entity entails.
The three main structuring options are:
- Sole trader
- Partnership
- Company
1. Structure as a Sole trader (individual trading as)
This is the simplest option to form your business. An individual, or sole trader, owns and operates the company in their personal capacity.
The advantages of structuring your Cairns operation as a Sole trader include:
- Low costs to set up the business
- Relatively straightforward setup process
- Full access to profit and loss
- Full legal control and independence for the owner
The disadvantages include:
- Success and failure aligned with the individual and not easily shared with anyone else involved
- Limited capacity to raise capital
- Potential liability in the eyes of the law for debts, no distinction between personal and business assets
If you are unsure if a sole trader structure is right for you, our lawyers can help. ContactPreston Law to learn more about our services.
2. Structure as a Partnership
Partnerships are another common option. Two or more legal entities or individuals form a partnership with the goal of making shared profit as a business.
The partners are both liable for any debts but also share the profits and the losses of the business.
The advantages of structuring your Cairns operation as a partnership include:
- Sharing potential profits, losses and risks
- The business can benefit from skill sets contributed by all partners
- Setup costs are relatively low
- increased potential for raising capital
- Losses are accessed by partners directly
The disadvantages include:
- Potential conflict in running the business and decision making
- Potential legal liability – partners are jointly and severally liable
- Partners are responsible individually for the debts of the business
3. Structure as a Company
An enterprise structured as a Company has it’s own legal entity and standing, meaning that it can operate commercially in its own right. It can legally sue or be sued, as well as own property. The owners of the company become ‘shareholders’ and are separated (mostly) from the business entity.
The advantages of a company structure include:
- Asset protection for the shareholders (however directors can be liable for debts in some cases)
- Legal transfer of ownership is simplified through shares
- Taxation can be favourable
- Wider pool of skills and knowledge
The disadvantages can include:
- Relatively higher setup and running costs
- Regulatory compliance required
- Decision making is through a board of Directors – less individual control
- Liabilities, risks and obligations for directors
What to consider when choosing a business structure?
When you are deciding how to best structure your organisation in Cairns, it is advisable to consider what is essential in your circumstances. Here are some ideas to start:
- The nature of your business
- The potential size/ growth of your company
- How important is personal control?
- Are you keen to share costs, risks and profits?
No matter which structure is best for your commercial circumstances, the advice of a Queensland legal expert at this stage can be invaluable.
Cairns-based firm, Preston Law has been assisting clients in Queensland for many years with all their commercial requirements.
Our team of lawyers is local and understands the Cairns region and the issues which affect our clients.
Our lawyers focus on understanding the circumstances and requirements of our clients so that we can provide the best strategy and services for you and your firm.
Our legal services include:
- Workplace Relations and Employment Law
- Commercial Disputes and Litigation
- Conveyancing Law
- Insolvency
- Agribusiness
- Mining Law
- Personal Injury Law
- Wills and Estate Planning
- Family Law
CallPreston Law today for an obligation free consultation on 07 40520700
*Please note that the information in this article is of a general nature and should not be construed as legal advice.