Ownership vs Control – in the structure of your business.

Ownership and control are not the same thing

The structure of your business and the people involved will determine who has ownership and who has control.It is important you understand the difference and how it may impact you moving forward.

Control is when a person, or group of people, have a controlling interest (more than 50 per cent) across two or more businesses. Control is not limited by the type of structure that you operate in, meaning the different businesses could be operated as a sole trader, partnership, trust or company. Therefore, you cannot escape these provisions just by setting up a new company or trust, unless there is a different person in control (meaning, someone else is the director or trustee).

The key distinction between ownership and control is that the owner and the person/people in control may not be the same under the different structures you may operate your business under. For instance, in a business run as a sole trader, the business owner also has the controlling interest in the business, so the same person has both ownership and control. In a company, on the other hand, the business is owned by the shareholders, whereas the business is controlled by the director. See the table below.

 

Structure Ownership Control Same/Different
Sole trader Sole trader Sole trader Same
Partnership Partners Partners Same
Company Shareholders Directors Can be different entities
Trust Beneficiaries   Trustee Can be different entities

 

In companies and trusts, the owner and the person/people in control may or may not be the same

For instance, Scabbit Builders Pty. Ltd. is run and managed by Brett, who has been appointed the Director of the company. Brett’s wife, Kristen, assists with the business when she can and she holds all the shares in the company. They own their family home and the title lists Kristen as the sole owner. This structure has Brett, the director of the company, as the person in control, while Kristen, the shareholder, is the owner of the company. In addition, we have the added benefit of protecting the family home as there is no responsibility attached to Kristen as she does not control the company and therefore does not have any liability should there be any legal of financial disputes.

It is common in smaller businesses that the person or people who own the business also control the business. In the vast majority of cases, it will depend on the owner’s family network and personal circumstances. The point to note here is that there is a distinction and understanding that could be of assistance when it comes to running more than one business and the possibility of minimising taxes and costs.

If you have any questions about your business and the structure you operate under, don’t hesitate to contact us.

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Tony Dimitriadis
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