Advantages and disadvantages of using a company as a business structure
Companies are an extremely popular business structure for carrying on trading activities. This is probably attributed to the degree of “limited liability” that a company business structure affords its owners. However, on closer examination of the costs and benefits associated with adopting a company business structure, it is difficult to see why the company has become so popular among the small business community.
Some of the more favourable commercial and tax aspects associated with incorporating a company for the purposes of carrying on trading activities include:
There are various real and opportunity costs associated with operating a business though a corporate structure.
In particular, the management of the company’s affairs must comply with the Corporations Act and is subject to the scrutiny of ASIC. Statutory accounts and Annual Returns may need to be prepared, and depending on the size and nature of the business, may need to be audited (both general audits and specific purpose audits for parties such as banks and guarantors).
The business person can no longer personally represent their business affairs in courts of law. A qualified solicitor and barrister must be retained by the company.
Key Considerations Partnership Sole-trader Trust Imputation Credits