Business & Investment Structures

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Given the myriad of taxation and business laws which exist in Australia, it is extremely important that your business and manner in which you make investments are structured correctly to take full advantage of the concessions available, whilst also providing you with the best possible asset protection strategy.

In achieving these goals, it is important for the structure to remain as simple as possible to avoid burdensome red tape and compliance costs, an unnecessary distraction for business owners from running a profitable business.

In Australia, the four most common structures (or combination thereof) used in private business groups are:

  1. Proprietary companies
  2. Trusts – both discretionary and fixed
  3. Sole traders
  4. Partnership of any of the above three structures.

When considering the business structure for a private business, there are five key factors which are commonly used to determine the most suitable structure for the particular circumstances and include:

  • Income Tax minimisation – the structure must provide the ability to minimise the annual tax liability on an ongoing basis.
  • Capital Gains Tax minimisation – the structure must provide the flexibility that any capital gains tax liability can be at worst minimised and at best eliminated.
  • Succession Planning – if necessary, and pending your plans, your structure must have the ability to allow the transfer between generations or sell the assets in the future.
  • Asset Protection – in our opinion the most important function of a structure is to ensure that private family wealth is protected from risk (business and other) and litigation.
  • Simplicity – the structure must be appropriate to meet your requirements, without being too complex such that it hamstrings the ability to grow due to red tape and compliance costs.

In order to achieve the correct structure, the first thing you should do is compile a comprehensive plan which will provide many of the answers to the above criteria that is used to determine the most appropriate structure.

If you are in business, this will involve a comprehensive business plan.

If you are an investor, this will involve a detailed plan of your goals and parameters upon which you wish to invest.

Each structure has both merits and restraints, therefore determining the most effective structure is about tailoring a structure to your objectives.

As part of the structure, it is also vital to implement appropriate agreements particularly where the parties are unrelated, to ensure that the respective parties protect their rights to the profitability and equity.

It is also a protection mechanism to ensure a smooth exit by either party, whether it be amicable or otherwise.

It is critical that you review your structure on a regular basis to ensure you are achieving your objectives.

Marsh Tincknell are specialists in “Structuring” and should you wish to connect with us to conduct an initial review of your business and investment structure, we would be more than happy to do so.

For a more detailed analysis, take a look at our comprehensive MT Technical Advice document entitled “Business and Investment Structures – The Complete Guide.”

Should you wish to discuss the above issues in further detail, please do not hesitate to contact Marsh Tincknell on 07 3422 8000 or info@mtaccountants.com.au

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