Choosing a business structure

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Last updated on December 20, 2016

The legal structure you choose for your business will affect how you register your business and will also have implications for tax.

A business can be legally structured in several ways and there are advantages and disadvantages for each.

We recommend seeking professional advice from your accountant, solicitor or financial adviser before deciding on your business structure, as you will need to consider many legal, financial and tax issues.

It is important to determine your business structure and type of business before you register a business or company as the steps may differ.

There are four main business structures for small business.

They are:

  • Sole trader: an individual trading on their own
  • Partnership: an association of people or entities carrying on a business together but not as a company
  • Company: a legal entity separate from its shareholders
  • Trust: an entity that holds property or income for the benefit of others

Business Structures

Sole trader

Partnership

Company

Trust

Is the structure difficult to set up?

No

No

Yes

Yes

Is it expensive to register?

No

No

Yes

Yes

Do I retain complete control?

Yes

No

No

No

Are there complex reporting requirements?

No

No

Yes

Yes

Will my assets (house etc...) be under threat if my business goes into debt?

Yes

Yes

Not as likely

Not as likely

Do I receive full profits made from the business?

Yes

No

No

No

Can I employ staff?

Yes

Yes

Yes

Yes

Do I have to pay myself superannuation, workers comp etc...?

No

No

Yes
(if employed by the company)

Yes
(if employed by the company)

Can I change the legal structure easily?

Yes

No

No

No

Do I have the ability to plan tax through avenues like income splitting?

No

Yes

Yes

Yes

Is it easy to raise capital?

No

Yes

Yes

Yes

Is it easy to dissolve or exit?

Yes

Yes

Yes

No

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