If you’re starting a real estate business and you’re unsure which business structure to choose, you’ve come to the right place! 

First, it’s important to say up front: there’s no one-size-fits-all approach here. Every business owner’s circumstances are different, which is why it’s so important to understand your goals and what you want to achieve before deciding on a structure. 

 

key business structures for real estate businesses 

 

There are two key structures we often recommend to clients that offer the most flexibility as your business grows. Watch below as I walk you through them or, if reading’s more your thing, keep scrolling! 

 

1. a company 

 

A company trades in its own right. It has shareholders, and it’s a separate legal entity. This can be helpful because while you may be starting the business on your own, at some point you may want to bring other owners on board. A company gives you the flexibility to do that through shareholders. 

When it comes to tax, companies get taxed on the earnings they make along the way. If a company sells a capital asset, there’s no access to the general Capital Gains Tax [CGT] discount. 

 

2. a unit trust 

 

A unit trust [not to be confused with a family trust] also has defined owners and can give you flexibility to bring in additional owners later on. 

Unit trusts do not pay tax along the way. Instead, they are required each year to distribute all profits to their unit holders. This means that each unit holder is responsible for the tax they pay on those profits. A potential advantage here is that unit trusts have access to tax benefits such as the general 50% CGT discount. 

 

why choosing the right business structure matters 

 

Choosing the wrong structure, or one that doesn’t allow you to bring in new owners, could cost you time and money if you need to roll your business into a more suitable structure. 

While there’s a lot more to consider when choosing a business structure, the key takeaway is this: there’s no one-size-fits-all approach. The best outcome comes from understanding the goals of your business and what you want the journey to look like. From there, you can select the best structure. 

 

need a hand? 

 

If you’re starting a real estate business [or planning your next stage of growth], getting your structure right from the beginning can save a lot of time and stress later. 

If you’d like help working through what makes sense for your business + goals, reach out to the real estate accounting team or give us a buzz on 1300BDEPOT.

 

want more real estate insights?

Sign up to our mailing list below!