[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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limited to the amount (if any) unpaid on their shares.
• Directors can be personally liable in certain circumstances (refer to
our comments in respect of director’s liability below).
• Can be easier to raise finance.
• It continues indefinitely, so no succession issues. • Suitable for businesses that want to expand. • Taxation benefits - the differential between the corporate rate and the top effective personal tax rate may give rise to tax planning opportunities in certain circumstances. • Profits may be accumulated and re- invested by the company without the need for distribution to shareholders. • Trusts may be more effective for tax purposes where assets are to be held for ultimate sale. • Trust structure can be more flexible than a company structure. For example, the legal restrictions that apply to reductions in the capital of a company do not apply to similar reductions in the capital of the trust. • Discretionary trusts have flexibility in the distribution of income. • Each party is treated independently for tax purposes. • Flexibility in management/governance arrangements.
Trust
• It can be expensive to set up a trust. • Trust structures are complex and are subject to numerous legal and regulatory requirements. • The trustee is subject to strict legal obligations.
Unincorporated Joint Ventures
• There is usually joint liability to third parties.
CORPORATE GOVERNANCE AND REGULATION Individuals, partnerships and corporate entities that operate businesses in Australia are subject to a broad range of regulatory and reporting requirements which vary depending on a range of factors, including the: • structure, nature and ownership of the entity which conducts the business;
• state or territory in which the business is being conducted; and • nature of the business being conducted (such as the type of goods or services that are provided).
ILN Corporate Group – Establishing a Business Entity Series
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