Business Structure Type

Deciding a business structure is important in setting up a strong foundation for your business growth. Typically, there are four types of business structures available in Australia for our clients.

 

Sole Trader

If you’re a freelancer or a one-man band, a sole trader business structure may be right for you. It’s relatively easy to set up and run, is cheap to set up, and has few reporting requirements. However, there are downsides – you are personally liable for any debts incurred, and it’s not suitable if you’re looking to grow or hire employees.

 

Partnership

In a partnership, two or more people run the business. You may elect to register your business as a partnership. Like a sole trader, a partnership is a low-cost and simple way to set up your business. In this arrangement, you have shared control and management of the business with your partners, and each partner is required to pay tax on their share of the net income they receive. As with a sole trader, you and your partners are personally liable should you incur any debts.

 

Company

This is a good option when you have employees or are looking to protect your assets, a company is a separate legal entity that has the same rights as a person – they can incur debt, sue and be sued. As the owner, you can limit your personal liability and are usually not liable for company debts. However, setting up a company can be initially expensive and has complex reporting requirements.

 

Trust

A trust arrangement allows a third party (the trustee) to hold assets on behalf of beneficiaries. For example, you may create a trust to provide ongoing support to a family member under your will, to provide taxeffective real estate planning, or to benefit a charity. While a trust has its merits, it can be difficult to set-up and maintain and is usually best left to the professionals.