4 types of business structures in Australia: Which one is best for you?

The business structure refers to the legal structure of a business

In the early stages of building a business, you need to decide how you want it to be structured.

In Australia, there are four main types of business structures, including:

  • Sole Trader
  • Partnership
  • Trust
  • Company

Each type has different responsibilities for owners, costs, legal and tax obligations.

When deciding which structure is the best for your business, it helps to weigh up the pros and cons.

Here is are the most common type of business structures in Australia and their advantages and disadvantages:

Sole Trader

A sole trader is the most simple, convenient, and cheap business structure.

The sole trader (or single owner) of the business controls and manages the business on their own and is entirely legally responsible.

Being the sole trader can be extremely rewarding, but it can almost come with significant pressure.

Advantages:

Choosing which business structure is right for you - Bookipi

Partnership

A partnership is formed when two or more people operate a business and share the income.

This structure is useful to share skills and assets to improve the business.

Partnerships also distribute the responsibility and risk for the owners.

Choosing which business structure is right for you - Bookipi

Trust

A Trust is a business structure that manages funds and assets and can invest on behalf of beneficiaries.

This type of structure is commonly used to protect, manage and pass on assets down in families.

Choosing which business structure is right for you - Bookipi

Company

When a business owner/owners legally register the company, this reduces individual liability for the owners.

This means if the company incurs debts or is sued it does not solely fall on the directors or shareholders.

This business structure is more costly and complicated to set up but is highly beneficial for tax-purposes once the business starts turning over a certain amount.

This structure is also ideal for a business that wants to be able to easily introduce additional owners, investors, and shareholders.

Choosing which business structure is right for you - Bookipi