Business Structure

Essay by bo_boUniversity, Bachelor'sA, October 2004

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Business Structure

When Comencing a business, it is important to considr the best form of proprietorship or ownership of the business. There are four basic entities which are presently available:

-Sole Traders



-Trading Trust

The following points are a brief outline of these four entities. And i will be covering the Company part in this report.


A business may be conducted by a Company as an entity in its own right and comes into existence by incorporation under Companies legislation which also regulates the running of the company and sets out the duties of its officers.

It is normal for a solicitor to prepare documents and apply for incorporation. It has a memorandum setting out its powers and Articles of Association governing the carrying out of these powers. A Company has shareholders who are the owners of the Company and directors who run the Company. The shareholders may also be directors and employees which is often the case in a small family business.

The company is subject to taxation in its own right payable in quareterly instalments. Shareholders receive a credit towards the tax on dividends equal to the relevant amount of tax paid by the Company.

The liability of the shareholders is limited to the unpaid calls, if any, on their shares in the company and therefore a company structure may be advantageous in a high risk business. But often major creditors will call upon directors to personally guarantee the Company's liabilities. Personal liability of directors and employees may also arise out of an offence under the Corporations Law or negligence in the performance of their duties.