Hi there. There are different ways you can structure and run a business, each with their own advantages and legal obligations.

Given that your business will be ‘for profit’ and will engage in trade and commerce by selling items, the typical business structure you should be considering is a company. A company is a separate legal entity that is created when you incorporate and register your business. A company can have its own assets and debts, enter contracts with third parties, and sue and be sued. A company is owned by its shareholders who can change from time to time. You can be a shareholder, and so too can a future capital investor.

Every company has a least one director who is responsible for the direction and management of the company. In your situation, this could be you and your business partner, plus anyone else you want to appoint as a director. In Australia, directors and other company officers must comply with a number of legal obligations under the Corporations Act 2001 (Cth). There are also reporting requirements and associated administrative costs with running a company. The Australian Securities & Investments Commission has more information about setting up and running a company (www.asic.gov.au).

While the downside to running a company is the regulation and administration involved, the main benefit is that, if your company is sued by a customer or supplier or another third party, you will generally not be personally liable. Instead, any legal claim will be against the assets of the company. Other business structures, such as partnerships, generally do not offer the same protection and you may be personally liable for any claims made against the business.

You mentioned that your business will donate 50 per cent of its profits to charity. In Australia, there are special laws that apply to not-for-profit (NFP) organisations. A NFP organisation does not operate for the financial gain of individual members. It can make a profit, but these profits must be used to carry out the purposes of the organisation. While your business, as currently planned, does not appear to be a NFP organisation, it is worth considering the NFP laws and any available tax concessions, such as income tax exemptions. In any case, as your business may be donating part of its profits to charity, you may be eligible to claim these payments as tax deductions, provided the recipient charity (or charities) is an eligible ‘deductible gift recipient’. For more information on NFP organisations and associated tax concessions, visit the Australian Taxation Office’s website at www.ato.gov.au.

In addition to the above, there are several other things to consider when setting up a business. For example, depending on the type of business structure you choose, you may need to apply for an ABN, a Tax File Number, register your business name and domain name, lodge a trade mark application to protect any intellectual property, take out business insurance and/or register for GST. More information about starting a business in Victoria can be found at www.business.vic.gov.au.