TAXONOMY – Best exit strategy

BUSINESS STRUCTURES | ADVANTAGES | DISADVANTAGES | Companies | * Your liability for the company’s debts is limited, although this protection can be destroyed by creditors, including financiers, calling for guarantees from company directors * It’s easy to transfer ownership by selling shares to another party * Shareholders (often family members) can be employed by the company * Taxation rates can be more favourable * You’ll have access to a wider capital and skills base | * The company can be expensive to establish and maintain * You are required to provide annual and other returns to the Australian Securities and Investment Commission (ASIC) * Your financial affairs are public * Directors’ activities are scrutinised by ASIC * It can be costly to wind up the business | Incorporate Association | * Limited liability * Possible tax advantage (if you qualify for a small business tax rate) * Specialised management * Ownership is transferable * Continuous existence * Separate legal entity * Easier to raise capital * Name protection | * Closely regulated * Most expensive form of business to organise * Charter restrictions * Extensive record keeping necessary * Possible double taxation of profits * Shareholders (directors) may be held legally responsible in certain circumstances * Personal guarantees undermine limited liability advantages | Trust | * Limited liability is possible if a corporate trustee is appointed * The structure provides more privacy than a company * There can be flexibility in distributions among beneficiaries * Trust income is generally taxed as income of an individual | * The structure is complex * The Trust can be expensive to establish and maintain * Problems can be encountered when borrowing due to additional complexities of loan