Setting up a local entity: what will be your strategy?
If you want to do business in a new country, you may need a legal presence there. Generally, you may choose between putting a new company, registering as a foreign company, or acquiring an existing company.
Investors will have to make a decision whether they establish a new company, register as a foreign company, or acquire an existing company.
To those that seek to establish a new company, they can choose from a variety of business structures. Each of these structures will have its own regulatory and tax considerations. Businesses may also need to establish their identity through a trademark, online and/or physical presence.
Choosing a Business Structure
There are a number of business structures that investors can choose from when starting or expanding their business. The main types include: sole trader; partnerships; trusts; and companies. The names in this article are predominant for Anglosakson countries, but also in other countries the same distinctions are being made.
Depending on their needs, investors should carefully weigh their options and select the structure that perfectly suits their business requirements. Whichever business structure they will choose, it will determine the license that they will get for the operation, as well as tax and legal implications. One should understand that each structure has its own set of advantages and disadvantages.
Four main structures for international trade
If a person does a sole trader business structure, he will be legally responsible for all aspects of the business. That means debts and losses cannot be shared to others. Although you can employ people into your business, as a sole trader, you are in-charge of all the decision making about starting and running the business. This can be a good structure to choose when doing business in Australia, as this is the simplest and relatively inexpensive.
Partnership is a business structure that involves a number of people that conduct business together. Businesses that are done jointly with another person or even up to 20 individuals can apply for partnership. Just like the sole trader structure, it is relatively easy and inexpensive to set up. However, it is not also a separate entity. In case of debts and losses, you and your business partners are personally liable. Since you are not considered an employee in partnerships, you will be responsible for your own superannuation arrangements.
Trust is an obligation imposed on a trustee who is responsible for holding property or assets for the benefits of others, known as beneficiaries. If you plan to set up a trust, you should know that it can be expensive to set up and operate. How the trust operates should also be determined, so a formal trust deed is required. The trustee must also undergo formal yearly administrative tasks. If you are a trust, the trustee is legally responsible for the operation of your business, if the trustee is a company, they can provide some asset protection.
Unlike a sole trader or partnership, a company is a separate legal entity. What this means is that like a natural person, it can incur debt, sue, and be sued. Shareholders of the company have the option to limit their personal liability and are generally not liable for company debts. In other words, it has limited liability, as compared to other structures. It is also relatively a more complex business structure to start and run. The operations of the company are controlled by directors and owned by shareholders. The earnings of the company also belong to it, not to individuals.