One of the main legal benefits to incorporation is the safeguarding of one’s personal assets against claims by creditors and lawsuits as would be the case when operating as a sole trader or in a partnership.

A corporation is managed by stockholders, directors, and officers and liability is limited within the provisions of the corporation. A shareholder who has invested $100 in stock can lose no more than $100 and has no further liability to the company’s debts and obligations.

Other benefits include:

• Establishment of retirement funds
• The ability to raise funds by selling stock
• Durability beyond the death of shareholders, directors, and officers of the corporation
• A different rate of taxation than as individuals including distinctions in capital loss and dividends
• The ability to have a credit rating as a corporation

To accurately understand your benefits and obligations under incorporation, we suggest you have a discussion with one of our Solicitors to ensure you are protected in such a venture.

A joint venture (JV) is a contractual agreement between two or more entities that is formed for an express single purpose.

Again it is a phrase commonly mis-used with far reaching consequences.

Legally, the conceptual difference between a partnership and a joint venture is that with a joint venture each person contributes a skill or an asset which they retain the ownership and control of,

A joint venture for the development of a piece of land may include the Builder (contributing skill) maybe the Town Planner/architect (contributing plans and specs) and the land owner (obviously contributing land).  Profits are shared in a predetermined way and each participant retains their own tax deductions and liability for the transaction. None of these assets are pooled in the sense of legal ownership.

This can be useful in all sorts of transactions but the legal and taxation implications can be far reaching (both Positive and negative) and thus it is highly recommended that you do not embark upon a joint venture without professional assistance.

Advantages to a joint venture include:

• • Sharing the strengths of the members
  • Minimising risks by sharing them amongst members, and
  • Increasing competitive advantage in the marketplace by the accumulation of skills and assets within the entity.

All parties in a joint venture are able to exercise control over the enterprise and will share responsibilities, revenues, expenses, and assets.

Due to the complexities outlined above, entering into a JV requires precise contractual terms outlining the shared risks and liabilities.
Q Solicitors is highly experienced in this area of business law and we recommend consulting our team for advice on your situation.

Sole trading is the most basic form of legal trading structure.

Is a Sole Trader structure the right one for your business?  If you intend to operate your business on your own (without any partners, including your spouse); chances are a sole trader structure could be the best option for you and your business.  It is simply what is says it is – a sole trader.

Advantages of sole trading

• It is an inexpensive option that is simple to set up and maintain.
• You have total control over the direction and management of all areas of your business.
• All of your business’s profits and assets are owned by you.
• The paperwork involved is less than other business structures.
• There are minimal statutory provisions and government regulations involved with how you operate your business.
• You do not have to disclose your profits to the public – allowing greater privacy than with a Company structure.
• Disbanding is relatively easy. You keep any after-tax gains if you sell the business.

Disadvantages of sole trading

• You are fully liable for your business debts, so you risk losing personal assets (home, vehicles, etc.) if you cannot repay your debts. Similarly, any intellectual property may be at risk if the business fails.
• You may be limited in how long you can stay away from the business (i.e. less holidays). Similarly, if you become sick or have an accident your business may stop operating.
• You pay tax on profits at your marginal tax rate, which may be higher than the company tax rate.
• You need to put money aside to pay tax; otherwise, you may have cashflow problems at tax time.
• Few tax concessions are available.
• The business structure limits opportunities for expansion.
• And lastly if you don’t like your boss – you are stuck with him (her).

Our team at Q Solicitors currently provide ongoing assistance to many Small Businessrd throughout Australian and around the world.  Why not contact us to discuss your individual needs.

There are numerous types of trust used in the commercial arena but essentially they boil down into two main groups these being Fixed trusts and discretionary.

There is a third type of trust which is a compilation of the attributes of both the unit and the discretionary trust.  It is fittingly referred to as a hybrid trust.

Unit Trusts
In a unit trust, the beneficiaries’ rights to the capital and income from the trust are rigidly defined by the number and type of units as held by those individuals within the Trust.

The Units in the trust are able to be readily traded between members or even on the open market.

There are particular rules on the taxation of the units and the ultimate distribution of the trust upon termination and vesting.  Professional advice should be sought before acquiring any “off the shelf” solutions.

Discretionary Trusts
In a discretionary trust, the trustee has the power to decide which beneficiaries will benefit from the trust’s capital and income and what by what method and on what schedule they will receive proceeds from the trust.

No beneficiary in a discretionary trust has any absolute right or interest in the trust’s income or capital outside of what is decided by the Trustee.

Hybrid Trusts
A hybrid trust combines the best features of unit and discretionary trusts, making for great flexibility as well as tax advantages. In a hybrid trust, the trust can be split into units yet a trustee can have additional powers to pay income or capital to beneficiaries according to his or her discretionamongst Particular classes of units. A hybrid trust is an excellent choice if you hold capital growth or income-generating assets.

Some advantages of a trust include:

• Optimisation for asset protection and protection against bankruptcy and insolvency.
• A relatively low cost and simple structure, easy for old owners to leave and new owners to join
• The ability to ‘stream’ income and flexible tax planning: the ability to distribute different types and amounts of income and capital gains to beneficiaries dependent on their financial situation, such as to those who may have low tax rates
• Benefits/income can be passed to beneficiaries without any change in the ownership of investments
• Absence of any formal legislative framework, such as the Corporations Law, to control the activities of the trustee
• No Audit requirement – Accounts for Income Tax Return preparation only
• Confidentiality of information – no statutory disclosure requirements
• Unit holders can claim a deduction for the interest incurred on the cost of their units

What type of trust structure is right for you depends greatly on your circumstances and what you are trying to achieve. Q Solicitors offers full business trust planning services for peace of mind and long-term security.

In simple terms, a partnership is a single business in which two or more entities share ownership, either equally (50/50) or on a percentage basis. Each entity of the partnership contributes to all aspects of the business and shares in profits and losses as well as liability.

In a partnership, many taxes are paid not by the business itself but ‘passed through’ to the partners who must file accordingly in their individual returns.

Limited Partnerships
An option exists as well to form a limited partnership in which one or more partners do not participate in management or controls of the business.

In most limited partnership structures a company is established which assumes the role of the Administrative or managing partner.  This “partner” assumes full unrestricted liability for the Partnership affairs whilst the other is called a ‘limited partner’ as they are freed from the partnership’s liability and obligations.

Limited partnerships have a restricted life span and so they are usually project specific.  They are therefore of great advantage for high capital establishment activities such as viticulture or Riskier ventures such a film making.

Partnerships are easy to form and have the advantage of pooled capital resources and skills. Partners can be liable for the debts and actions of the other partners and their assets can be used to satisfy the partnership’s debts.

Personal property contributed to the partnership or acquired with partnership funds becomes the property of the partnership unless otherwise specified.

Some basic considerations to include in a partnership agreement:

• Amount of equity invested by each partner
• Type of business
• How profits and loss will be shared
• Partners pay and compensation
• Distribution of assets on dissolution
• Provisions for changes or dissolving the partnership
• Dispute settlement clause
• Settlement in case of death or incapacitation
• Restrictions of authority and expenditures
• Length of partnership

Our team at Q Solicitors is skilled in all areas of business law and can assist you to achieve your specific business goals.