Are you looking to start your own or expand on your existing interior design business? If so, it’s important to consider what business structure best suits your needs.
Choosing the right business structure to suit your circumstances is a critical first step. Understandably, business owners may find this a daunting and stressful task. However, with a good understanding of your business needs and the right information at hand, this doesn’t need to be the case.
As an interior designer, a lot of value lies in your creative work. As such, you may benefit from combining expertise and resources with other business owners in your industry. If this sounds like something you are likely to do, or are already doing, you may consider entering into a partnership. Alternatively, if you wish to remain free from the fear of personal financial liability, a company business structure may be better suited to your needs. There are many advantages and disadvantages to partnerships and companies as business structures, so it’s important to consider these in relation to your circumstances before making a decision.
Should I Enter Into a Partnership?
A partnership business structure consists of two or more people signing a document stating that they wish to conduct business as a single entity.
What are the benefits of a partnership?
- Partnerships are relatively inexpensive to set up. They are also simple and can be easy to run.
- If other interior designers can complement you, setting up a partnership agreement with them allows you to share resources and may entitle you to advantages you wouldn’t otherwise have.
- Partnership agreements are flexible, allowing you to include the terms you wish.
- As your business grows, you can take on more partners. An incorporated partnership allows up to 20 partners.
- Partnerships are entitled to certain tax benefits.
What are the disadvantages of a partnership?
- Forming a partnership with a person or business results in an inseparable link with your partner/s in the eyes of the law. As such, you must choose your partners wisely as you may be liable for their actions.
- A partnership is not considered a separate legal entity, meaning each partner has unlimited personal liability.
Should I Set Up a Company?
If you are afraid to expose yourself to personal financial liability, a company may be a preferable business structure for your interior design business. A company is the most common business structure for startups and larger enterprises.
What are the benefits of a company?
- Since a company is a legal entity separate from those individuals involved in it, the financial liabilities of your company are considered separate from your personal financial liabilities. This makes choosing a company as your business structure a relatively low-risk venture.
What are the disadvantages of a company?
- As the director of a company, you will only be able to receive a wage and will not have direct access to profits. As a result, you might be exposed to the payroll tax and compulsory superannuation.
- There may be stringent laws relating to how often and in what manner you must report company profits.
- Due to reporting requirements, the cost of running a company is much greater than many other business structures available to your interior design business.
It’s important to consider which business structure suits your interior design business’ needs from an early stage. Understandably, you may have concerns about the implications of business structures on your liability, day to day operations and finances. If you have any further questions or require assistance in setting up, get in touch with our business structure specialists on 1300 544 755.