Small Biz Matters – a half hour program each week where you can work ON your business rather than IN it. with Alexi Boyd from Boyd Office Management Services
Setting up a business can be both simple and complex. It’s relatively simple to register your business name and start as a sole trader. But is running your business as a sole trader the best option for you? Today we will talk about some of the common business structures that you can consider when starting up and also some tips to help you decide on which structure may best suit you and your business.
Here to help us today is Addy Pong from Small Business Legal Team based in North Sydney. He’s helped many small businesses get up and running the RIGHT way.
Welcome to the show Addy.
Topics we’ll be covering:
Structuring & setting up your business
- Introducing the analogy of how choosing the right business structure is like choosing the right car.
- Going through the legal differences of different structures (sole trader, partnership, company and trust) and also how to set up each of those structures and the legal documents required.
- Ownership of assets and business risk exposure – Sole Trader vs Company
- Illustrating by an example as to how your personal assets can be exposed to business creditors if you are operating as a sole trader E.g. if you are operating as a sole trader and your business is indebted to a supplier, the supplier can make a claim against you personally, whereas with a company they can generally only sue the company.
- Limitations of trading as a sole trader compared to a company:
- The difficulties of attracting investors to the business (as a company you can raise capital by selling some of your shares to investors, whereas you cannot do this if you operate as a sole trader)
- Not being able to introduce employee incentives such as offering employee shares (I will go through what is an employee share scheme and the benefit of it as an employee incentive)
- The potential problem and costs that you may face if you are required to change your structure down the track because it doesn’t suit your business needs (e.g. switching from a sole trader to a company)
- The need to renegotiate your contracts (e.g. with your employees, suppliers and landlord)
- If your business owns real property, then you will be required to pay stamp duty on the transfer of this property to the company.
- 5 quick questions to ask yourself that can help you decide on the right business structure:
- Are you planning to run solo or will you be thinking of having business partners down the track?
- Are you looking at growing your business or is it more about providing a steady source of income?
- Will your business acquire any real property?
- What is your acceptable level of business risk?
- Is estate planning sometime that you have in mind when starting this business?
To find out more go to their website: http://smallbusinesslegal.biz/