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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 and how you want to run it. Each structure may have an impact on key areas such as tax you’re liable to pay, asset protection and costs to set up.

There are a number of structures that you can choose from when starting or expanding your business including:

  • sole trader – the simplest structure, gives you full control
  • company – more complex, limits your liability because it’s a separate legal entity
  • partnership – made up of 2 or more people who distribute income or losses
  • trust – where a trustee is responsible for business operations
  • co-operative - a member-owned business structure with at least five members.

How to choose a business structure

When you decide on a structure for your business, choose the one that best suits your business needs. Consider each option carefully, as there are key factors and rules to consider for each structure.

Your business structure can determine:

  • the licenses you require
  • how much tax you pay
  • whether you're considered an employee, or the owner of the business
  • your potential personal liability
  • how much control you have over the business
  • ongoing costs and volume of paper work for your business

You can change your business structure throughout the life of your business. As your business grows and expands, you may decide to move to a different type of business structure.

Key differences between business structures

Sole trader Partnership Company Trust
Cost Low Medium Medium to high High
Complexity of setting up Simple Moderate Complex Highly complex
Tax obligations Low Low Medium High
Legal obligations Low Low to medium High Medium
Owner You You and your partners Company shareholders Trustee
Responsibility for business decisions You You and your partners share The director(s) Trustee
Responsibility for debts or losses You You and your partners share Generally, the company Trustee
Separate bank account needed No Yes Yes Yes
Extra administration and reporting No Yes Yes Yes

Need help deciding?

Before committing to a business structure, seek advice from a professional business adviser, lawyer or accountant.

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