Saturday, 9 February 2013

Starting a business – business structures

There are a number of different structures that you can use to operate your business. The five main types of business structures used by small businesses include:
  • Sole trader – a sole trader is a type of structure where the business has no separate legal existence from its owner.
  • Partnership – a partnership is a type of structure where two or more people start a business and can legally share profits, risks and losses according to terms set out in a partnership agreement.
  • Trust – a trust is a relationship where a business is transferred to a third party who has legal control and has a duty to run that business to benefit someone else.  There are two main types of trusts: discretionary and unit trusts.  In a discretionary trust (e.g., a family trust), the trustee has discretion in the distribution of funds to each beneficiary.  In a unit trust, the interest in the trust is divided into units, similar to shares.  Each unit holder may have a number of units in the trust.  Distribution from the trust is determined according to the number of units held.