There are various ways you can structure and run a business in Australia, each involving different legal obligations. The professional services firm in Queensland you are considering buying may currently be structured as a proprietary company, a partnership or sole proprietorship.

Proprietary company

Proprietary companies in Australia are regulated by the Corporations Act 2001 (Cth). This legislation allows foreign citizens to be directors of companies. However, for proprietary companies, there must be at least one director who ordinarily resides in Australia. This means you can be a director of the Queensland business you are considering buying, but you would need to appoint an additional director who lives in Australia.

Australian law also places special legal duties on directors of companies. For example, a director needs to know what their company is doing and must ensure the company keeps proper records. If you intend to be a director of the Queensland business, you will still be required to comply with your legal duties as a director even though you are based overseas for most of the year.

If you simply intend on becoming a shareholder of the business (and not a director), then your control over the running and management of the company will be limited to your rights as a shareholder. For example, you would be entitled to vote at general meetings but you would not be able to set the strategic direction of the business, as this power sits with the director(s) of the company.

Partnership

If the Queensland business is structured as a partnership, you would be joining the existing partnership as a partner of the firm. This would require you to sign an accession deed under which you would agree to be bound by the terms of the partnership agreement. This document sets out how the partnership operates, including your level control over management of the business. Importantly, partners in a partnership owe special legal obligations to each other and one partner’s liability can affect the entire partnership. Subject to the terms of a partnership agreement, there are generally no restrictions on a foreign resident becoming a partner of a partnership in Australia.

Sole proprietorship

If the Queensland business is currently operated as a sole proprietorship, this could present difficulties for you when purchasing the business. Without a company or partnership structure, it is possible that the outgoing principal holds all the business agreements (such as leases and customer contracts) in his or her own name. Assigning these agreements to you as the incoming purchaser may be a difficult and time consuming process.

Other issues to consider

You should also be aware that, as a foreign resident, you may be taxed by the Australian Taxation Office on your Australian-sourced income, such as the money you earn working in Australia running the Queensland business.

We suggest that you speak to a lawyer about the various legal issues that you may face in purchasing and running the Queensland business, regardless of how it is structured. A lawyer can help you understand your options, the risks you may face in buying the business, and your legal responsibilities after purchase. By pressing the "Take Action" button - which opens late July 2015 - LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services.