Which Business Structure Is Right for You?

Choosing the right business structure is one of the most important decisions you’ll make when starting or expanding your venture. Your structure affects control, liability, costs, ongoing compliance and—critically—the way you’re taxed. Below is a quick guide to the five main options in Australia, a summary table of their key differences, and a brief overview of each structure’s tax implications.

Sole Trader

A sole trader is an individual running a business under their own name (or a registered business name). It’s the simplest and cheapest structure, granting you full control—but also unlimited personal liability for debts and losses. You can employ staff but cannot “employ” yourself.

Tax implications

• You use your personal tax file number (TFN) and lodge business income/expenses in your individual return.
• If your business turnover ≥ $75 000 p.a., you must register for GST and lodge Business Activity Statements.
• You pay tax on all profit at your personal marginal rate and may elect to prepay via PAYG instalments.
• You can claim a deduction for personal super contributions (after notifying your fund) but not for personal drawings.

Source: business.gov.au & ATO: Key tax obligations

Partnership

A partnership is two or more people (or entities) carrying on business together. Income and losses flow through to partners, who share control, liability and profits/losses according to their agreement (or equally if no agreement exists).

Tax implications

• The partnership lodges its own return (no tax paid at that level) and issues each partner with their share of net income or loss.
• Each partner reports their share in their individual or entity tax return and pays tax at their own rate.
• The partnership must register for an ABN, and for GST if its turnover ≥ $75 000 (or $150 000 for not-for-profits).
• Income distributed to partners is not taxed twice—partners bear the tax liability personally.

Source: business.gov.au & ATO: Key tax obligations

Company

A company is a separate legal entity owned by shareholders and run by directors. It offers limited liability (shareholders’ risk is generally limited to their share capital) but comes with higher setup and administration costs.

Tax implications

• The company lodges its own tax return and pays tax at the company tax rate (currently 25–30%).
• Profits distributed as dividends may carry franking credits, which shareholders can use to offset personal tax liabilities.
• Must register for an ABN, and for GST if turnover ≥ $75 000 (or $150 000 for not-for-profits), and lodge Business Activity Statements as required.
• Directors and employees are subject to PAYG withholding; super guarantee applies to all eligible workers (including directors).

Source: business.gov.au & ATO: Key tax obligations

Trust

A trust is an arrangement where a trustee (an individual or company) holds assets on behalf of beneficiaries. Trusts can be used to run a business, invest, or hold property—often for asset protection and income-splitting benefits.

Tax implications

• The trust lodges its own return and issues beneficiaries with distribution statements.
• Beneficiaries pay tax on net trust income allocated to them at their personal rates.
• The trustee pays tax at the highest marginal rate on any undistributed income (and for non-resident or minor beneficiaries).
• Trusts register for an ABN, and for GST if turnover ≥ $75 000 (or $150 000 for not-for-profits), and lodge Business Activity Statements as required.

Source: business.gov.au & ATO: Key tax obligations

Co-operative

A co-operative is a member-owned company (minimum five members) operating for mutual benefit. Members share control and profits, and liability is limited by shares. It’s more complex to set up and run than a partnership, but can suit community or member-focused enterprises.

Tax implications

• Co-ops are taxed as companies: lodge a company tax return, pay the company rate, and distribute profits via dividends (with possible franking credits).
• Must register for an ABN, and for GST if turnover ≥ $75 000 (or $150 000 for not-for-profits), and lodge Business Activity Statements as required.
• Super guarantee and PAYG withholding apply to employees and directors as for other companies.

Source: business.gov.au

Key Differences at a Glance

Feature	Sole trader	Partnership	Company	Trust
Cost to set up	Low	Medium	Medium–high	High
Complexity	Simple	Moderate	Complex	Highly complex
Liability	Unlimited personal	Joint and several	Limited	Limited (trustee)
Tax return	Individual return	Partnership return + individual	Company return	Trust return + beneficiary
Administrative burden	Low	Medium	High	High

Source: business.gov.au

Before deciding, always seek advice from a qualified adviser—your choice of structure can have long-term legal, tax and financial consequences.