BUSINESS STRUCTURES - ALLIED HEALTH AND HEALTHCARE PROFESSIONALS

Allied health and healthcare professionals starting their own business need to understand what structures are available to them and which structures are appropriate for their circumstances.  Each type of business structure will have its own pros and cons and getting the right advice at the commencement of a business is crucial for business success.

Types of business structures

It is important to understand the types of business structures available before starting any new business. Four of the most common business structures used in Australia are discussed below.

 Sole trader

In this business structure you operate the business as an individual and are the sole personal legally responsible for all parts of the business. Being a sole trader can be a cost-effective structure for a single person businesses. However, there are two key issues to consider before setting up business as a sole trader.

Firstly, all income will be treated as personal income and taxed at appropriate personal income tax rates. Secondly even if you employ people to work for you, your personal liability will not be limited in any way. You will be solely responsible for all debts and liabilities of the business.

Partnerships

In this business structure, two or more individuals set up and run a business together but not as a company. A partnership agreement governs how the partnership operates as between partners particularly in terms of profit sharing.

Partnerships are relatively simple business structures to set up and often popular for family businesses. One potential downside of a partnership is that ordinarily each partner will have unlimited liability for any debts or liabilities incurred by the partnership.

Company

In this business structure, a company is created for the business and is set up as a separate legal entity to any shareholders of the company. It is an appropriate structure for many businesses as it reduces liabilities for the owners of the business and can be used to protect assets.

Any income is earned is earned by the company and not the individual. This potentially may result in a more beneficial tax rate than if earnings are classified as personal Operating a company does bring with it certain responsibilities though including the need to lodge company accounts and tax records including BAS statements.

Trusts

In this business structure, the trust is the entity that holds property or income for the benefit of others. Trusts are cost effective to set up and can be used to minimise individual risk and enable business income to be distributed to a number of individuals or entities.

The use of trusts, including family trusts, as a means of distributing income, have been subject to ATO scrutiny in recent years and it is important that any trust structure is properly established and appropriately managed on an ongoing basis. We would suggest accounting advice be obtained should this structure be proposed.

Obtaining the right advice before commencement of the business can save money and offer better protection for the owner’s personal assets.

Chelsey Grbcic at Wallace Law Group can advise you on the best structure for your business and is an expert in providing advice to allied health and healthcare professionals on all corporate and commercial matters. Please contact her chelsey@wallaceweir.com.au 1300 011 123

Please note that this article is written as an informative piece and that you must not take the contents of this article as legal advice. Wallace Law Group accepts no liability from your reliance on this article.