Legal Structures

Sole Traders

for people who are starting in business, self-employed or contracting. Setting up is quick & easy but you are responsible for paying back all the debts putting your personal assets at risk. You pay tax on all the income you earn from your work & claim all the expenses to reduce your income tax. This is the simplest trading structure but also the one with the greatest risk.

Partnerships

a partnership is when two or more people (or organisations) form a business. If there is no partnership agreement then profits, debts & work is shared equally. A partnership does not pay income tax as a business but rather the partners pay the income tax on their share. This also means that each partner is liable for the debts putting their personal assets at risk. There is also the option of a Joint Venture for one off projects that may better meet your needs.

Companies

a company is legally separate from its owners (directors & shareholders) which limits the owners’ risk. Shareholders are responsible for paying a company’s debts but can have a share of the company’s profits. A company pays tax on its profits only – the income left over after taking away the expenses. With the use of LTC’s (Look Through Companies) capital gains and profits can be passed directly though to shareholders like a partnership but with limited liability to the world at large.

Trusts

a trust is created when a person (settlor) transfers property to named people (trustees) to be held for the benefit of people chosen by the settlor (the beneficiaries). A trust is given a name, is a separate entity like a company, but it’s not. Businesses aren’t normally run through a trust but can be part of a business structure. Talk to us about how Parallel Trusts may better suit your goals.