When considering a change to your business structure, consulting with expert commercial lawyers can help develop a plan best suited for the ongoing needs of your business. The following FAQs offer some guidance on the matter.
Under what circumstances might a business need to change its current structure?
Often businesses start small, with a legal structure to suit. However, as the business grows and profit margins increase, the initial structure of a sole trader or partnership may no longer be suitable. Registering as a company could be more beneficial for accommodating business growth, employing more staff, developing more goods or services, and expanding into bigger markets.
Another example would be if a sole trader expands by joining forces with others in similar trades, thus needing a partnership structure. In this context, legal advice is crucial for protecting the rights of all individuals involved as they move forward with the new business structure.
What are the current trends for business structures in Australia?
According to the Australian Bureau of Statistics (ABS), the most common types of business structures between 2013 and 2014 were companies and trusts. There were approximately 700,000 companies and 500,000 trusts actively trading during this period.
The selection of these two types of structures increased from the previous year whereas sole proprietors, public sector businesses and partnership structures decreased. Research by the ABS also suggested a trust was most likely to survive from June 2010 to June 2014.
What are some key factors to consider?
A strong strategy is built on research, and changing a business structure is no exception. There are several factors to be informed about. These include the tax requirements for different structures, the varying costs and capital, the legal implications, and the daily operations that may need to evolve using updated management methods.