Choosing the right business structure

The way you structure your business should be tailored to your proposed operations and personal circumstances and provide you with the best protection possible.

Sole trader

When starting a business by yourself, operating as a sole trader may be preferred due to its simplicity, however, as a sole trader you will be liable for all losses and debts incurred in the course of running your business.

Partnership

Starting a business with partners can be fraught with unforeseen issues which may not seem apparent at the beginning of the venture. A formal partnership agreement should be drafted to put partners on the ‘same page’ at the start of their relationship and to provide for contingencies and unforeseen problems. A downside commonly cited in relation to partnerships is that all partners bear the liability for all debts and losses incurred by the partnership no matter which partner is responsible.

Company

You can create a company by registering it with the Australian Securities and Investment Commission (ASIC). As it is a separate legal entity, a company structure can help you to avoid or minimise some of the pitfalls of personal liability which may otherwise arise in a partnership and sole-trader structures.

We can help you make informed choices when setting up your business structure whether by partnership, joint venture, company, trust, or franchise. If you are looking to restructure your business, we can also assist with partnership dissolutions and corporate restructures.

Business contracts

Business contracts are essential in governing the commercial arrangements between two or more parties, whether that be a B2B or B2C arrangement.

We can prepare or review all types of legal contracts including purchase or sale of business, franchise agreements, supply agreements, service agreements, distribution agreements, partnership agreements, shareholders agreement and standard form contracts. We will ensure that the contract terms and conditions are suitable for your business now and into the future, and that any compliance and due diligence standards are met.

Insolvency

It is illegal for a company in Australia to trade while insolvent. A company is insolvent if it fails to pay its debts by the date that they fall due. If you are facing insurmountable debt and financial difficulties in the operation of your business, you may be trading while insolvent and not even be aware of it.

The main methods of dealing with insolvency include:

• Liquidation: where a company’s assets are disposed of with the purpose of paying its outstanding debts. The most common form of liquidation is where a company voluntarily elects to enter liquidation.
• Voluntary Administration: if you are seeking to avoid liquidation, entering into voluntary administration allows for the appointment of an external administrator to review the company’s position, provide advice on its future and may potentially avoid the liability that goes with insolvent trading.

If your company is struggling with debt, you should seek legal advice so that you can find the best way forward for your business and avoid any unnecessary personal liability.

Intellectual Property

Intellectual property forms a valuable component of your business and should be protected accordingly. In Australia, trademarks, patents, plant-breeder’s rights, and designs can be registered with IP Australia to ensure protection of intellectual property rights. Legal advice should be sought so that the correct registration is selected.

We can help manage and enforce your intellectual property rights through various measures, for example, by preparing licensing, confidentiality and non-disclosure agreements, or by taking action against a party who has infringed your intellectual property rights. We can also help with the registration of your designs, patents, and trademarks.

Succession & asset protection

Whether you choose to move on from your business, or something unforeseen happens, it is important to have structures in place so that the assets of your business can be protected and passed on to future generations.

Succession planning and asset protection should consider the nature and structure of your enterprise and be tailored to your personal circumstances. You may need to update your Will, any current agreements in place and any trust structures which exist, or which you wish to create.

A discretionary trust is a popular means of asset protection in Australia and may be an appropriate way to protect your assets. This structure allows a trustee, which legally owns the assets of the company, to distribute income belonging to the trust to its beneficiaries. Such a structure can protect assets from creditors through a properly drafted trust deed and by appointing a corporation as the trustee.

We can work with your business and family to devise a succession plan that keeps your hard-earned assets safe.

We offer practical legal solutions to individuals, small businesses, and SMEs. We can help get business start-ups and microbusinesses off to a good start and nurture and sustain more established businesses and corporate enterprises through growth and change. We also advise mature and larger businesses further expand whilst still mitigating risks as part of the growth.