| Advantages | Disadvantages | Starting Costs |
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Ease of establishing and dismantling. Minimal reporting requirements. Greater control in operating. Tax losses may be offset against other income. All income received and all losses borne by one person. |
Personal liability for debts. Lack of ability to income split. Lower limit of tax deductable contribution to a super fund. |
Business name registration – approx $100 |
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As for a sole trader, except for a sharing of income and losses in agreed proportions. Increased availability of capital and ideas. Sharing of responsibilities. |
As for a sole trader, except income splitting with other family members available in certain circumstances. Potential for dispute in operating. |
Business name. Partnership Deed – about $1,000. |
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Company continues after death of directors/shareholders. Injections of new capital often available with new shareholders. ‘Corporate veil’ can be used to prevent individuals being exposed to debts. Losses transferable from one another within a group under certain circumstances. Substantial ability to split & vary income between family members. Discretionary ability for payment of dividends. Certain concessional (deferral) available relating to the payment of capital gains tax. |
Strict legal and taxation reporting necessary. Personal guarantees often required on company transactions. Directors potentially liable for conduct of the company in certain circumstances. More expensive to establish and dismantle. Fringe benefits tax payable on allowances made for employees. |
Shelf company acquisition (up to $1,000). Annual reporting requirements (up to $1,500). May still require the registration of a company to business name. |
When Is a Business Name Required?
Any business operating in New South Wales must register a Business Name with the Office of Fair Trading. The Australian Securities Investments Commission (ASIC) governs the operation of company names. If a company wishes to carry on a business, yet trade under its specific company name, in certain circumstances it will not be necessary to register a business name.
Purchasing a Business
To purchase a business without investigating and having a proper understanding of the financial statements and history of the business can bring disastrous results. We can provide comprehensive advice and access to consultants who can assist you in determining the viability of a business, the price being asked for it the proposed structure and best means of acquisition.
Leases of Commercial Properly
An existing lease can be transferred to the incoming purchaser of a business provided all arrears of rental and other obligations of the existing tenant have been performed.
The current rental, the means of reviewing that rental, the availability of an option, calculation of outgoings, insurance and signage obligations are all important aspects to consider when seeking to have the benefit of an existing lease or entering a new lease. We have extensive experience in the drafting and negotiation of commercial leases and their interpretation.
There will be occasions when unfair or unconscionable clauses in leases can be set aside. However, the Courts will be reluctant to intervene with a commercial deal struck between two parties having equal bargaining power. For this reason it is essential legal advice be sought on all commercial leases.
Other benefits often attach to a lease, including the availability for car parking, signage rights on the building and sub-letting, all of which require special attention.
Legal Costs
On the sale of a business each party will pay their own legal costs.
On a commercial lease, traditionally it has been the case that the tenant will pay the owner’s solicitor’s costs of preparing the lease, having it registered and any fees charged by an existing mortgagee to consent to registration of the leases.
On a retail lease, the tenant does not pay the landlord’s preparation of lease costs.
There is an increasing trend for legal costs to be negotiated in lease negotiations such that each party will often be asked to pay their own costs. We are happy to provide an initial estimate of our fees and disbursements (or outlays) in each of these type of matters. Our solicitors’ time is charged at set hourly rates. Please talk to our solicitors if you have any questions regarding our fees.