In Show 115 – Education – Phase 2 Startup originally broadcast on Facebook Live on Wednesday 1 August 2018 where we explore this interesting topic.
Download a copy of the workbook here: 115 – Worksheet
Show Notes
It’s a new month and the start of a new phase of the Business Legal Lifecycle. Phase: 2 Startup will explain the process of setting up a new business. If you get everything right at the start of your business you will be in a much stronger position in the years to come. There are many aspects of your business that you have to consider. Here are some of the more important elements.
Structuring your business
There are a number of different ways to setup your business. They each have different advantages. Consulting your team of advisors will help to guide your decision.
- Company
A company is a separate legal entity apart from the individuals involved. The company is made up of the director who has the day to day control of the company and the shareholders own the company and are entitled to the profits. The best reason for creating this structure is to ensure that you are not personally liable for the debts and liabilities the business incurs. - Discretionary Trusts
This kind of trust is probably the most popular asset protection strategy you can use. The trust is controlled by the trustee who has legal ownership. The appointer decides who will be the trustee. The beneficiaries have beneficial ownership of the trust. The whole point of this structure is to protect individuals and the trusts assets. - Unit Trusts
Similar to a discretionary trust in that it also is controlled by a trustee. The difference is that there is also includes unit holders. Those unitholders are the actual owners of the trusts assets. It gives you the tax flexibility of a trust while maintaining control of the business. Many of the tax advantages of these kinds of trusts are no longer in effect but they are still useful in many contexts – especially in property development. - Partnership
Partnerships are two entities or two individuals who come together. You shouldn’t just use a partnership straight away because of liability issues.
Personal liability
Depending on how you structure your business you could be personal liable in a number of scenarios. A judgement against you or a personal guarantee means you not the company is responsible. You want to structure your business to reduce that liability as much as possible.
Leases
Leases are a big part of any company. It’s the right to occupy a premises in exchange for money or some other form of compensation. There are different kinds of leases. The first is a retail lease that allows you to operate a store front. The other is a commercial lease. There are very complicated rules that differentiate between a retail and commercial lease.
Insurance
You have to have some kind of insurance when operating a business. What kind of insurance you need will depend on the business you operate. General liability insurance, professional liability insurance, product liability insurance and insurance on the building you lease are just some examples. What you need will have to be discussed with your insurance broker.
Taxes
Taxes can’t be ignored and you should always be putting some of your profits aside to deal with that inevitable tax bill. There are a number of taxes you are responsible for. Company tax, GST and income tax are just some examples. Make sure you have a good accountant who will make sure that you are not paying too much.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
