Once you have purchased or started a business, you need to decide which is the best legal structure for your business. The options are a sole trader; company; partnership or trust. They all have advantages and disadvantages, so it is always best to obtain professional advice.
This is the most common form of structure and is the cheapest. All that is required, is that you register a business name with your local state Dept. of Fair Trading. The business is joined with you personally, so you only have to complete one annual tax return. The disadvantages are that there are no opportunities for tax planning, or allocation of income between yourself and the business. Also, any legal liabilities incurred while trading are yours personally. Lastly, it is very difficult to sell part of the business to an employee or another person.
Once a business expands beyond that of a micro business, it is worth considering the cost of forming a company. This involves a set-up fee of around $1,000 plus an annual licence fee of currently $249. There is also the cost of an annual tax return which is usually close to $1,000. The advantages are that income can be split between the company and yourself for tax planning. Also, the company is a separate legal entity, so you are protected from bankruptcy and legal action pertaining to the company (in most circumstances.) You can also sell or gift part of the company, as the purchaser will be buying or receiving shares in the company.
There are also partnerships and trusts, but these can be quite complex and usually require special circumstances.
