Important NoteThis guide’s intended to give you a heads up on what to consider and doesn’t replace professional accounting, taxation or legal advice for your specific business.
Get Ready For an Exciting New Challenge
You’ve notched up some great achievements on your event management belt, and the next step is starting your own business. It’s an exciting and challenging move with so much to consider. If you’re more of a creative, like many event professionals, you might find some parts of setting up a business less interesting than others.
Ditto business structure, which may be something you hadn’t even considered.
Although it ranks low on the excitement scale, understanding the pros and cons of different business structures or ‘entities’ is important.
Types of Business Structure
The three main types of business entity in Australia that apply to event management businesses are:
Our quick guide defines the structures, their general advantages and disadvantages, with an example event management business that might operate under each one.
When it comes to choosing a business structure, the key things to keep in mind are:
- Setup costs
- Ongoing costs for accounting, which increase with extra tax reporting requirements
- Complexity and volume of paperwork
- Taxation benefits
1. Sole TraderA sole trader is the simplest and least expensive business entity. A sole trader is an individual who operates the business and is legally responsible for the business. It’s a common structure for micro-businesses such as freelancers, contractors and consultants across many industries.
Jemima sets up as a sole traderJemima was the in-house Event Manager at a multinational finance company for 10 years. She’s returning to work after having a baby, and wants more flexibility in her working life.
Jemima always wanted to run her own business, so she’s excited to be getting started with a few clients already lined up. Jemima will be flying solo, so it’s important for her to minimise costs and administrative requirements.
Jemima opts for the simplicity of a sole trader structure and organises her:
- ABN number – it’s free to get an Australian Business Number (ABN) from the Australian Business Register.
- Bank account – Jemima sets up a separate bank account to make it easier to manage her finances, which is widely recommended. Sole traders can, however, user their personal bank account for sole trading income.
- Business name – Jemima operates under her first name and surname, so she doesn’t need to register a business name. Sole traders can register a business name if they wish, through the Australian Business Register.
2. PartnershipA partnership allows 2-20 people to run a business together and share income. Like a Sole Trader, a Partnership is not a separate legal entity so there is unlimited personal liability.
Christine and Adriana go into partnershipChristine and Adriana both worked at an event management company. They team together incredibly well when producing events for demanding, high-end corporate clients.
Christine specialised in sales and business development, and was an ace at securing new clients. Adriana’s focus was more hands-on creativity and operations.
They decide to enter into a partnership business structure together, with a great mix of complementary skills and having proven success working together.
Christine and Adriana organise:
- ABN number for the partnership – free from the Australian Business Register.
- Separate Tax File Number (TFN) for the partnership
- Business bank account for the partnership
- Business name registered with ASIC, via the Australian Business Register.
- Register for GST because they estimate the partnership income will be more than $75,000
- An accountant who can help them with tax reporting obligations
3. CompanyUnlike sole traders and partnerships, a company is a separate legal entity. Although anybody setting up a company has legal obligations such as superannuation for employees, the liability for business debts falls with the company.
Joanne starts an event management companyJoanne branched out on her own 5 years ago as a sole trader Event Management business. The business has grown and Joanne has brought 2 employees on board to help with the day-to-day workload.
With new clients in the pipeline Joanne needs to scale up, while finding economies of scale – such as sharing office rental – and additional taxation benefits to make it a viable and profitable business. Joanne decides that a company structure suits her best, with business growth inevitably bringing more business risk, and not wanting to expose her personal assets.
- An Australian Business Number (ABN) – free.
- Registration of a proprietary limited company and ACN number
- Business name registration – transfers her existing business name
- A separate business bank account, which is mandatory for companies
The good news is that you’re not locked into one business entity, and you can restructure it just as Joanne did when her business needs changed.
Choosing the right business structure from the start will help you avoid stressful surprises down the track. You’ll know up-front any legal and taxation reporting obligations, so you can plan ahead and get professional accounting or other support when you need it. That leaves you free to focus on what you do best: event management!
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