Start Up

When it comes to running a business in Australia, there are various structures to consider. Let’s have a look at the most commonly used ones:

Sole Trader

It is easy to start trading as a sole trader and set up costs are minimal. As a sole trader you can trade under your name or choose a business name. If you choose a business name, you must register it with Australian Securities and Investment Commission pursuant to Business Name Registrations Act 2011 (Cth).

You will be taxed at your personal rate and will be personally liable for any obligations.

Partnership

Two or more individuals or companies can form a partnership. Partnerships are generally limited to 20 partners and are not separate legal entities.

Partnership Agreements are used to create partnerships and define rights and responsibilities of the partner subject to the state or territory legislation.

In general, partners share in profit and are jointly and severally liable for liabilities. In some states such as New South Wales however, limited partnerships are stipulated under Partnership Act 1982 (NSW). Such partnerships must be registered with Fair Trading NSW.

Joint Venture

Joint ventures are formed by two or more individuals or companies. In a joint venture, parties pursue the same strategic goal while entities remain distinct.

Joint ventures are similar to partnerships but the usual difference is that joint ventures have a defined end.

Joint ventures can have a separate legal entity when incorporated and if unincorporated, no separate legal entity forms.

Joint venture agreement sets out rights and liabilities of the members.

Trust

Trusts are popular with family businesses.

The Trustee owns the trust property and must operate the business on behalf of the beneficiaries.

Trust deeds are important documents in establishing and defining beneficiaries’ rights.

Company

An obvious choice for carrying on a business is a company, which can either be proprietary or public. For the purposes of this short note, lets focus on propriety companies.

Companies have separate legal entities and can have assets and owe liabilities in their own rights.

A proprietary company is limited to 50 non-employee shareholders and cannot raise funds.

A company is managed by its directors and owned by shareholders.

A company must have a registered office in Australia and at least one Australian resident director in the case of proprietary companies. Shareholders do not have to be Australian residents.

Directors have certain common law and statutory duties and can be even criminally responsible if in breach of their duties.

Other

There are other options such as Managed Investment Schemes, Incorporated Associations, Indigenous cooperation’s or co-operatives. We will discuss these in a separate post.