Welcome…
Structuring your start-up – Tips &
Traps
Disclaimer: The information contained in this document represents general comments and is provided for information purposesonly. It is intended as a guide only and does not represent advice on any particular matter. No warranty or representation is givenin respect to its content. Accordingly no responsibility is taken by Vincents Chartered Accountants or any member, representativeor affiliate of the firm, for any loss suffered by any party as a result of actions taken based on this information. To enable fullyinformed decisions, we recommend parties seek professional advice specific to their particular circumstances.
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Who am I?
� Steven Roberts
� Supervisor at Vincents Chartered Accountants
� 10 years in Business Services
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� 10 years in Business Services
� R & D Tax Incentive Specialist
� Innovation and Commercialisation Grants
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Which Structure - A key decision!
� Business or a Hobby?
� One size does not fit all
� Which legal structure
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� Which legal structure
� Pro’s and Con’s of each entity
� Change with growth
� Flexible
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Considerations
� Control
� Asset Protection & Liability
� Commercialisation
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� Commercialisation
� Funding
� Tax
� Access to Government Grants
� Cost
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Considerations - Control
� Who control’s the entity
� Through growth and adding investors
� Responsibilities
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� Responsibilities
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Considerations – Asset Protection &
Liability� Personal Assets
� Family Assets
� Personal Liability
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� Personal Liability
� Structure Protection vs. Responsibilities
� Joint & Several Liability
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Considerations – Commercialisation
� Perpetuity
� Family Business?
� Multinational?
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� Multinational?
� Dissolution or Exit
� Changing Structure
� Short vs. Long Term
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Considerations – Funding
� Initial investment
� External investors
� Passive, Active and Silent investors
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� Passive, Active and Silent investors
� Grants
� Balance work needed to prove concept vs. what
needs to be done to attract investors
� Combination of entities to achieve funding
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Considerations - Tax
� Tax Rates
� Losses
� Distribution of Profits
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� Distribution of Profits
� Capital Gains Tax
� GST
� Hobbies/Non-Commercial Loss
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Considerations – Access to Government
Grants� R & D Tax Incentive
� Local Government Grants
� State Government Grants
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� State Government Grants
� Federal Government Grants
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Considerations - Cost
� Setup
� On-going costs
� Reporting Requirements
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� Reporting Requirements
� Registrations
� Cost of getting it wrong
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Common Entities
� Sole Trader
� Partnership
� Company
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� Company
� Trusts
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Sole Trader
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Sole Trader
Control 100%
Asset Protection Zero asset protection and 100% liability
Commercialisation Business ceases with the sole trader
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Commercialisation Business ceases with the sole trader
Funding Very difficult = interest costs
Tax Difficult to tax plan, marginal tax rates, losses, CGT
Government
Grants
No R&D, limited access Government grants
Cost Simple and cheap to setup and maintain
Partnership
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Partnership
Control Shared amongst partners
Asset Protection Zero asset protection and % liability – not separate legal entity
Commercialisation Partnership ceases with entry or exit of partner
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Commercialisation Partnership ceases with entry or exit of partner
Funding Difficult
Tax Difficult to tax plan, marginal tax rates, losses, CGT
Government
Grants
No R&D, limited access Government grants
Cost Simple and cheap to setup and maintain
Company
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Company
Control Ultimately shareholders. Day-to-day directors (Fiduciary duties).
Same person may be both, make sure you know what hat you have on.
75% vs. 50% decisions.
Asset Protection Maximum – separate legal entity
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Commercialisation Easy with issuing shares and classes of shares, perpetual
Funding Simple, need to adhere to corporations act (unsophisticated investors).
Tax 30% tax rate, losses, CGT discount, franking credits
Government
Grants
Access to R&D, access to Government grants
Cost Reasonably expensive
Trusts
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Trusts
Control Ultimately appointer. Day-to-day trustee
Asset Protection Limited to assets of trustee
Commercialisation Family orientated
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Commercialisation Family orientated
Funding Difficult due to discretionary distribution of profits
Be aware of outstanding loans (incl UPE)
Tax Split income, tax rates of beneficiaries, losses, CGT, traps to distribute
income (flow through vehicle)
Government
Grants
No access to R&D, limited access to Government grants
Cost Reasonably expensive
Other Entities/Variations
� Partnership of Trust’s
� Pty Ltd vs. Ltd Companies
� Joint Ventures
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� Joint Ventures
� Discretionary Trust
� Unit Trust or Hybrid Trusts
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Things that can go wrong
� Appreciating assets in company
� Family trust with external beneficiaries
� Timing – expenditure as sole trader
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� Timing – expenditure as sole trader
� IP in separate entity
� Continuous partnership dissolutions and
reformation
� Individual trustee
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Steven Roberts – Supervisor
Direct Line: 07 3228 4068
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