The amount of choice and customisation available to people when looking to establish a practice can be overwhelming. There are so many variations of practice structures that it can be difficult to know which is best for your circumstance. This overview outlines some of the more common structures and why they may be right for your practice.
This decision will depend on several factors including the number of owners involved and the scale of the business to be operated. The most typical methods of ownership include:
- Sole trader
- Partnership
- Company
- Trust (whether Unit, Discretionary or Hybrid) or
- A company acting as trustee for the trust.
How many owners will be involved?
Where there is only one owner in the business, the governance can be relatively simple, and most doctors will choose to own their business as a sole trader, i.e. in their personal capacity.
If you are looking to add a layer of protection, you could utilise a company (potentially acting as trustee for a family trust). The benefit of the company is that it can add a veil of protection for some claims made against the business while maximising potential tax advantages. You should discuss these advantages further with your accountant.
Where there are multiple owners in the business, you will need
to consider a:
· Partnership – where a group of people form a
partnership to own and run the business.
· Trust – where a trust entity is created that will
receive the benefit of the business (though a trustee will be
required, this can be individuals or can be a company). ·
Company – where a separate legal entity is created which can
operate the business through its directors and distribute profits
through its shareholdings.
How will you govern the business?
Where there is more than one owner in the business, the relationship between the owners should also be governed by an ownership document. The table below shows the typical document and its corresponding business structure.
| Business Structure | Ownership Document |
| Partnership | Partnership Agreement |
| Company | Company Constitution Shareholders' agreement |
| Trust (Unit, Discretionary or Hybrid) | Unitholders' Agreement Trust Deed |
| Trust with a Corporate Trustee | Share and Unitholders' Agreement Trust Deed Company Constitution |
These documents can record important factors, including:
- The way the owners make decisions.
- What process needs to be followed if the owners have a dispute.
- How the owners will be paid or how the profits of the business will be used and shared.
- How owners can enter and exit the business in the future.
We can help you
Ultimately, what will be best for you and your business will need to consider the advantages and disadvantages of these options in view of your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.