TYPES OF ENTITIES OR STRUCTURES
There are five basic structures to consider:
- Individuals (sole traders); and
- Superannuation Funds
It is possible to combine these basic structures where complex structures are required.
- Business entities plus a Service Trust;
- Licensing of Goodwill or Intellectual Property;
- Pooled Development Funds;
- Business property held by a Trust;
- Unit Trust owned by a Discretionary Trust;
- Partnership of Discretionary Trusts;
- Limited Liability Partnership;
- Individual with an Investment Trust;
- Spouse owning assets;
- Superannuation Fund and Unit Trusts;
- Superannuation Fund as joint owner of property;
- Superannuation Funds undertaking business transactions.
Sole Trader or Individual
This is the simplest form of ownership, with legal liability resting with the individual.
A partnership is not a taxpayer in its own right. Each partner is individually assessable. It has similar issues to individual ownership but can offer opportunities for income splitting.
If a trust is used, taxation ultimately rests with the beneficiaries as it is not a separate legal entity. However, the trust may provide
asset protection and more flexible income-splitting opportunities.
A company is a separate legal entity and the operation is subject to more maintenance and costs than the other structures. Companies are currently taxed at a flat rate of 30% with a system of dividend imputation applying to dividends paid to shareholders. Liability can be limited and asset protection achieved by using a company.
A Superannuation Fund is effectively a trust subject to special rules. If these rules are met taxation is generally applied to taxable income at currently 15%.