Business structures analysis
In considering the most appropriate business structure for a business it is important to identify the ‘must have requirements’ for that business and the ‘important requirements’. It is, however also vital to consider the ‘business characteristics’ of a business structure. Below are just two examples:
Business Characteristics of a Private Company
- they involve risk
- the assets do not appreciate in value
- they have a high taxable income
- the ownership or appreciating asset can often be split from the business.
Business Characteristics of a Discretionary Trust
- losses are not likely
- appreciating assets are involved
- all stakeholders are related parties
- the allocation of profits changes from year to year.
When dealing with business structures your Chartered Accountant would also be able to identify:
- risk management issues with respect to the business
- related parties not to be involved/exposed to the risk of the business
- tax efficiency with respect to the profits and capital gains
- simple and inexpensive structures for the day to day operations.
It is always worthwhile reviewing your business’ structure from time to time to ensure the most appropriate structure is in place.
Talk to your Chartered Accountant if your business structure needs to be reviewed.
