Our business has been going for a while, but I needed advice on business structures and attracting more customers. I saw an SBDC adviser and the advice I got was very inspirational. They showed me there are several avenues I can take to grow my business.
Ahmad Abbas - Dynamo Fitness, Malaga
Choosing your business structure
One of the key decisions you’ll make when starting a business is its structure. Your choice of structure will depend on the size and type of business, your personal circumstances and how much you plan to grow the business.
You can change your business structure as your business grows or your circumstances change.
TIP: It is a good idea to discuss your proposed structure with your financial, legal or business adviser before starting your business.
Your business structure can determine your:
- tax liabilities
- responsibilities as a business owner
- potential personal liability
- asset protection
- ongoing costs and the volume of required paperwork.
There are several business structures, the first four are the most widely used in Australia:
- Sole trader - an individual trading on their own.
- Partnership - a number of people or entities running a business together, but not as a company.
- Company - a legal entity separate from its owners.
- Trust - an entity that holds property or income for the benefit of others.
- Co-operative - member-owned business organisation with at least five members.
- Incorporated association - an entity usually established for recreational, cultural or charitable purposes.
The four main business structures commonly used by small businesses in Australia are compared below.
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
|
More information
- Visit the ATO website for more information on choosing your business structure.