Are you looking to start your own locksmith business, or expand your already existing locksmith business? If so, it is essential that you consider what business structure you will use. Being aware of the different types of business structures available to you, is a fundamental necessity for any business owner, as the structure you choose will define how you do business into the foreseeable future. In addition, each business structure has separate positive and negative aspects that you will have to weigh against each other, when deciding which one is best for you. Although this may appear to be a daunting task for someone without prior legal experience, it is important that you have a firm grasp on the basics even if you do seek the advice of a legal professional.
Should I choose a Sole Trader business structure?
For those looking to start their own locksmith business, an excellent business structure to consider is that of a sole trader. This is the easiest structure to set up, and the lease amount of paperwork possible. It is also very cost effective, requiring little to no monetary input by you other than legal advice or registering a business name.
As a sole trader, you the person will be inseparable form you the sole trader in the eyes of the law. This means that your business will be the embodiment of you the person, providing you with complete ownership and control. Consequently, as a sole trader you can create any business structure you desire, employ the way you desire, and set up you finances the way that works best for you. In this way, a sole trader business structure will provide you with, by far and away, the most freedom of any structure available to you.
The downside of choosing a sole trader business structure for your locksmith business, is that all of your finances will be connected. This means that, in the result of a loss, you will be liable to make good that loss out of your personal finances, regardless of whether they are connected to the business. In drastic cases, this has resulted in people losing the family home, however, such consequences can be avoided through careful and gradual investment in the business.
Should I choose a Company business structure?
Conversely, if you are looking to expand your already existing locksmith business, or create and grow your locksmith business quickly, you should look carefully at using a company business structure. This structure is easily the most popular among Australian businesses and has allowed many businesses to achieve great success, through minimising risk, thereby allowing for the easy expansion of a business.
The main benefit of a company business structure is that your personal finances are separated from your company finances. Therefore, as opposed to a sole trader, if your company loses vast quantities of money, your family home will never be in danger. In addition, a company is a separate legal entity to that of a sole trader. This means that the business can easily be transferred to another person in the event of your retirement or death. Granted, it is unlikely that you are thinking about either at this stage of your life, however, eventually it will become foremost in your mind, consequently, it is important that you consider this factor when discussing the positive and negative aspects of a company business structure.
The negatives of this structure are that you will have to make compromises in order to achieve the financial protection it grants. A company is subject to numerous and rigorous laws relating to how it is to be structured and run. In addition, a company is quite costly to create and maintain. Finally, a company is not the business structure for someone who values their privacy, as your details will be on public record, and your taxes will be scrutinised very closely year by year.
If you are looking to start your own locksmith business, or expand your already existing locksmith business, it is important that you take the time to consider what business structure you will use. Two great options for a locksmith business are a sole trader and a company structure, however, there are many more options available to you, depending on your circumstances. Other examples include, a franchise and a partnership. If you would like to see a list of the business structures available to your business, please click here. If you have any further questions with regard to how which business structure you should choose, please call Legal Vision for a fixed-fee quote.