Start your business in 10 steps. The business structure you choose influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.
When do you need a formal business structure?
If you expect to earn a profit or if there is any potential risk in operating your business, you must operate under a formal legal structure to protect your personal assets. LLCs are simple to start and maintain and most small business owners choose to form an LLC.
What are the different types of business structures?
The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation. The S corporation (S corp) is a tax status that can be elected by a corporation or LLC. You’ll need to consider these questions when choosing the best structure for your small business:
When does it make sense to form a LLC?
If you expect to reinvest most of the profit back into your small business and you don’t need to attract investors, it would make sense to form an LLC. Small businesses usually carry very little profit from one tax year to the next. This is because small businesses often spend most of their income on expenses to help the business grow.
What happens if you convert to a different business structure?
While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications. Consulting with business counselors, attorneys, and accountants can prove helpful.
Do you need to register a business structure with ASIC?
You should also seek advice from a professional business adviser like a lawyer or an accountant. This is especially important for trusts and partnerships as the law on these structures can be complex. ASIC does not register business structures, we only register business names. There is no requirement to register your business structure.
Where can I get support for my business?
You can contact the government’s Business Support Helpline for free advice. You can also find free support, advice and sources of finance through your local ‘growth hub’. Get business support online, or over the phone. Get help with your business online, or by calling the Business Wales Helpline. Find business advice and support.
