Business law can be complex, and interacts with many other areas of law. On many occasions, you will have to refer to other areas of law, when considering all of the options on what you should do.
The first question that needs to answered, is the most basic: what is a business?
It is the answer to this question which then determines the decisions you need to start thinking about. This is because of the taxation and other reporting requirements that need to be complied with. In addition, you need to consider the risk factors, and, liabilities, that could arise, as a consequence, of what you do. Drake & Associates have the expertise to advise you on these important business issues.
So, What is A Business?
Any time you plan on being involved in any activity for the purpose of making a profit, you are involved in business. It may be you are selling a service, or, you could be working from home, or you may be running a cafe. It doesn’t matter what, if you plan on making a profit from what you do, you are running a business.
This means that you should retain receipts, and complete records of your activities, especially if you want to claim taxation and other concessions.
However there is a more fundamental issue that should be resolved at the time of commencing the business activity. The primary focus should be on establishing the right entity under which the business is to operate to begin with.
A common mistake of many people, is that they have a good idea, or plan, for a business to make money, and, they launch into the activity, without proper consideration of the long term outcomes. The business becomes successful, and suddenly, they realise that they have not created the right entity to take advantage of taxation and other benefits, or to minimise their exposure to personal liability. Changing to the right entity will cost money. This would have been saved with the right advice. Drake & Associates will provide the right advice to avoid these unnecessary business costs.
Which Business Entity?
There are a number of different structures available to run a business, and the choice of any, will be dependent upon your needs. Basically they fall into 3 categories:
- No specific legal entity
- Sole proprietor
- Partnership and/or joint venture.
- Separate legal entity
- Discretionary Trust
- Unit trust
- Hybrid trust
- Superannuation fund.
It can be seen that there are a number of various options available, and, you can combine the above entities, to suit your needs.
It is important to get it right to start with. If you have to change the business entities, or ownership, after the business has been running for some time, you will incur costs such as stamp duty, capital gains tax, and other unforeseen expenses.
So the first exercise you must undertake, is to establish your objective and the purpose of your business. This means, in determining the structure of your business, that you need to consider at least the following questions:
- Who is to control the business?
- Do you plan to provide for asset protection?
- Are there family law issues?
- Are there CGT or GST issues?
- Are there stamp duty or income tax issues?
- Are there any State tax issues, such as land tax or payroll tax?
- Are there to be plans for succession in your business?
- Are there personal liability issues?
- Are there specific requirements of the profession or industry?
- Are there compliance or administrative issues?
It is only after you have addressed the above questions, that you will really be in a position to start deciding upon the best structure to establish. Drake & Associates will advice you on the best structure to achieve the outcomes you seek.
Other considerations before you make your final decision on the business entitiy are:
- It should be flexible, to allow for changing circumstances, with little financial impact.
- It should provide protection for the personal assets of the business Principals.
- It should be a cost effective structure, both in administration and taxation.
- It should be structured to distribute profits efficiently.
Business law issues start with the establishment of the right structure to run your business. It is important to get it right to start with, otherwise, it will only cost you in the long term, if you have to, change the business structure. Call Drake & Associates now for that right advice.
You should obtain legal advice, in making these important business law decisions. Drake & Associates are professionals who can not only advise you, but, also assist in establishing the right structure for you. The costs you incur, will be tax deductible.