COMPANY
BUSINESS STRUCTURE- ADVANTAGES/ DISADVANTAGES
| Can have any number of business owners (shareholders) providing
varying levels of investment capital and personal services. |
| Provides limited liability- claims against the company fall on the
company, not the shareholders |
| May offer tax advantages when the tax rates for companies and
individuals differ e.g. tax rate for companies is 30c in $, whereas tax
rates for individuals differ (to $14000 12.5 c, $14000-$28000 21c,
$48001-$70000 33c, $70001 and more 38c). |
| May confer the impression of greater credibility and that the
business is “serious” and there for the long term. |
| Continuity- company can continue even if a shareholder or director
pulls out. |
| Provides more options for funding e.g. rasing of equity, venture
capital. |
| Easier to sell part of company than a sole trader or partnership
business structure- just sell some of the shares. |
| Does not protect you from personal liability as a director-
if it can be shown that you continued trading when the company was
insolvent you can be held to be personally liable for the debts of the
company. |
| Directors must be fully aware of the financial operations of the
company to prevent it trading while insolvent. |
| Does not provide any opportunity to spread business income to
family members on lower marginal tax rates other than through legitimate
wages. |
| Business losses have to remain in the company (unless the company
is a loss attributing qualifying company) and cannot be offset against a
shareholder’s taxable income from other sources. |
| A public company has to declare financial results publicly and has to be audited. |
| Depending on profit levels in first year, may have to start paying income tax earlier than other business structures. |
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