If you are about to embark on your first journey into running a business, then one of the first things that you need to consider in the early stages is what structure you should use. In fact, after working out what your business is going to be and how you will run it, the choice of whether you operate as a sole trader, partnership, joint venture, company or trust is probably the next decision you need to make. The choice of structure is important from a number of aspects including:
- Cost of formation;
- Cost of maintaining and compliance;
- Tax consequences which result from the structure used;
- The impact of business risk and the liabilities that can impact business owners;
- Commercial perception in the marketplace; and
- Future considerations regarding bringing on new owners or raising capital for the business.
Also, we believe that the decision on structure would be made at the early stage because specific care needs to be taken if you decide to change structure once the business has already begun trading and operating for some time because the Inland Revenue Department often frowns on businesses changing structure, especially if there are taxation advantages that flow from the structure the business changes to. If you are in the process of starting out in business we recommend you come and see one of us at Prudentia Law to provide you with detailed advice on what may be the most suitable structure for you.