Structuring your Business: Do you need an Accountant or Lawyer (or both)?

Why Your Business Structure Matters

Your business structure is the legal framework that your business operates within. It determines how your business is organised and how it is viewed in the eyes of the law. It also affects your tax obligations, your personal liability, and your ability to raise funding.

There are several types of business structures in Australia, including sole trader, partnership, company, and trust. Each has its own advantages and disadvantages, and the best choice for you will depend on your individual circumstances.

Seeking Expert Advice

When setting up your business structure, it’s crucial to seek expert advice. This is not a decision to be made lightly, and the implications can be far-reaching.

Commercial Lawyers and Accountants can both provide valuable advice in this area, but they focus on different aspects.

The Role of Commercial Lawyers

Commercial Lawyers can help you set up your company and trust structures. They focus on choosing the best structure for your personal circumstances in discussion with you. They can then advise you on potential risks associated with each structure and ways to mitigate those risks.

Overall, Lawyers can help navigate the legal aspects of setting up a business. This includes drafting and reviewing contracts, advising on Shareholder Agreements (which we strongly recommend are put in place wherever more than 1 person owns a company), and ensuring compliance with legal requirements.

If you’re considering setting up a proprietary limited company (ie a Pty Ltd company – referred to in the United States as an LLC), a Commercial Lawyer can advise you on the implications for your personal liability. They may suggest other structures be put in place for your business as well, particularly in industries that are high risk where the business has a chance of being sued.

Lawyers can also help you understand the legal requirements for running a company and acting as trustee (or the Director of a trustee company), such as reporting obligations and Director’s Duties. They can also assist with the preparation and maintenance of company records, an important aspect of running a business, and some Lawyers with the necessary experience can even act as your Company Secretary if required.

The Role of Accountants

Accountants play a key role in advising on the tax implications of your business structure. They can assist with tax planning, ensuring your chosen structure is as tax-efficient as possible.

For example, if you’re considering setting up a trust, an Accountant can explain how income distributed from the trust will be taxed. Accountants can also advise on the tax implications of changing your business structure in the future.

Getting the Full Picture when Starting a Business

In an ideal world, you would seek advice from both a Commercial Lawyer and an Accountant before structuring and registering your business. This will give you the full picture, helping you understand both the legal and tax implications of your decision.

Regular reviews are needed

Remember, setting up your business structure is just the first step in your business journey. It’s important to review your structure as your business grows and evolves.

Regular reviews with your Lawyer and Accountant can ensure your chosen structure continues to serve your business well, and give you plenty of advance warning when you need to change structures.

Conclusion

Setting up your business structure is a crucial step in starting a business in Australia. By seeking expert advice and carefully considering your options, you can choose a structure that supports your business goals and protects your interests.

Remember, the right advice at the right time can make all the difference to the success of your business.

FAQs

1. What are the different types of business structures in Australia?

The main types of business structures in Australia are sole trader, partnership, company, and trust. Each has its own advantages and disadvantages, and the best choice for you will depend on your individual circumstances.

2. Why is it important to seek expert advice when setting up my business structure?

Setting up your business structure is a crucial decision that can have significant implications for your business. Commercial lawyers and accountants can provide valuable advice on the legal and tax implications of your decision, helping you choose the best structure for your circumstances.

3. What is the role of a Commercial Lawyer in setting up my business structure?

A commercial lawyer can help you understand the legal implications of different business structures. They can advise on potential risks and ways to mitigate those risks. They can also help you set up your company or trust structure.

4. What is the role of an Accountant in setting up my business structure?

An Accountant can advise on the tax implications of different business structures. They can help you understand how your tax obligations will be affected by your choice of structure.

5. Should I seek advice from both a Commercial Lawyer and an Accountant?

A Commercial Lawyer and an Accountant can provide complementary advice on different aspects of your business structure. By seeking advice from both, you can get a full picture of the implications of your decision.