You are an experienced chartered accountant specializing in business structures. David contacts your office and makes an appointment with you. During your meeting with David, he advises you that he wants to set up a plumbing business. David anticipates that he and his wife Ruby will run the business jointly and are open to others joining their business as employees or to assist to manage their business as it grows. He wishes to be able to easily source capital in the future should the business expand. They want to keep their costs and tax burden low and want as minimal paperwork as possible in terms of running the business. They hope to use a low risk business structure where their liability if anything goes wrong with the business is kept minimal. David believes that he will need to invest $150,000 in the business and will do this by borrowing the money from his local bank. David would like to understand the different ways his business can be structured.

You should address at least 2 possible structures in your answer which might be suitable to him. In your advice please address the following concerns that David has.

● How to set up the structure.

● Is it a separate legal entity or not
● Potential liability issues

● Is the structure easily dissolved?

● Tax burden

● Reporting Burden

● Ease of raising capital

● Other pros and cons. Advise him using the IRAC method (Business Structures IRAC Grid- see Resources). Please refer to relevant case-law in support of legal principles discussed.

Answer rating: 100% (QA)

There are several business structures that David and Ruby could consider for their plumbing business Here are two options that may be suitable for the... View the full answer