Business Structures for Setting up an Advertising Agency

Advertising agencies in Australia generated over $2.1 billion in revenue last year. If you are looking to start your own advertising agency, you should decide which business structure will work best for you. Any business structure you choose will have to co-ordinate with your long term business strategy in order for it to be effective. Consequently, it can sometimes be difficult for business owners to marry the correct structure with their business model. In addition, you will want to have detailed knowledge of the structures that appear most appealing to you, such as that of a company or a sole trader. Finally, it may be best to seek legal advice during some stage of the decision process in order to ensure that you are aware of all the legal implication involved.

Setting up an Advertising Agency as a Company

The advertising industry has a low concentration, with the four largest advertising players accounting for 30.6% of industry revenue in 2015-16. The six largest companies are estimated to account for 39.8% of industry revenue for the year. One of the options available to your advertising agency business is that of a company business structure. If you have an already existing business or some capital, this structure will allow your advertising agency to grow and hire employees.

The main benefit of a company business structure is limited financial liability, which means all debts incurred by agents of a company during the course of company business, will stay with the company. This structure is because a company is considered an individual legal entity in the eyes of the law. As a result, company directors, like you, are able to take calculated risks without fear of losing the family home as a consequence of failure. Therefore, once your advertising agency company is created, you will be able to either expand more rapidly or engage in a more aggressive marketing campaign than advertising agencys with other business structures.

Establishing an Advertising Agency as a Sole Trader

Although consolidation is expected over the next five years, as the major players acquire emerging digital agencies, setting up as a sole trader is an easy process. A sole trader structure will allow you to have complete control over the structure of your business and its finances.

A sole trader is essentially a single person who conducts business. Therefore, as opposed to a company, the law does not distinguish between the person and the business, meaning there is full financial liability. But this allows a sole trader to have direct and immediate access to all profits made by the business. As a result, any profits made by your advertising agency business can either be reinvested in the business or spent on other things.

Some owners thrive under these conditions while others struggle with the burden of making decision that will have a bearing on not only their business life, but their personal life also. This will be an issue that should be at the forefront of your mind when deciding if a sole trader business structure is best for your advertising agency business.

Key Takeaways

Strategic thinking and creativity are vital to winning accounts in the advertising industry. If you are looking to start your own advertising agency business or expand your already existing advertising agency business, now would be a great time to begin to decide which business structure will work best for you. Our business lawyers can assist you with not only setting up your advertising agency, but also advertising compliance.