Business structure

Do you know which business structure is right for you?

The 4 popular business structures are:

  • sole trader
  • partnership
  • company
  • trust.

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Which business structure is right for you?

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How many people will own your business?

A business owner is someone who controls your business. They get the final say in decisions about money.

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Will your business hold assets for others?

Assets can include:

  • cash
  • securities
  • real estate
  • valuable personal property.

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Compare business structures

A sole trader or company structure may be right for you.

Compare some of the differences to help you decide.

Sole trader Company
Business decisions are made by: You Directors

As a sole trader, you're responsible for business decisions.

Directors of a company are responsible for business decisions. You have full control if you’re the only director. If there’s more than one director, they follow rules set out in the company’s constitution or replaceable rules.
Setting up your business costs: $44+ $597+

Set-up costs for a sole trader may include:

  • business name registration – $44 for one year or $102 for 3 years
  • domain name registration and web hosting for a website
  • licences and permits depending on the industry.

Set-up costs for a company are higher. They may include:

  • company registration – $597 for a proprietary limited company and an annual review fee of $321
  • business name registration – $44 for one year or $102 for 3 years
  • domain name registration and web hosting for a website
  • licences and permits depending on the industry.
Setting up your business is: Easy More complex

You’re ready to go as a sole trader as soon as you get your Australian Business Number and register for any taxes, licences and permits. It is a good idea to set up a separate bank account but you do not have to.

Setting up a company is more complex. Make sure you understand your legal and tax obligations first. You also need to set up a separate bank account and have a registered office and principal place of business.
Changing business structures is: Easy More difficult

As a sole trader it is easy to change to a partnership or company structure.

It is not easy to change from a company structure. You need to voluntarily deregister or wind up the company depending on its assets. Winding up the company can be complicated.
Money belongs to: You Company

As a sole trader you own the money your business earns. You treat the money as income on your personal tax return.

In a company the money your business earns belongs to the company. You keep the money in a separate bank account. You cannot use it to pay for personal expenses. There are rules about how to pay your shareholders and directors.
Losses are the responsibility of: You Company and directors

As a sole trader you’re personally responsible for payments, taxes, liabilities and losses.

A company is responsible for payments, taxes, liabilities and losses. Directors may be personally responsible for losses in some cases or if they breach their duties.
Risk to personal assets is: High Low (for shareholders) to medium (for directors)

As a sole trader your liability is unlimited. This means all personal assets in your name may be at risk if you owe business debts or someone sues your business.

In a company your personal assets are not at risk. They’re separate from the company. Directors are only personally responsible for losses in some cases.
Tax rate that applies is: Individual tax rate 25% or 30%

As a sole trader your business income is part of your personal income. If your total income is $18,200 or less you do not pay any tax. This is the tax-free threshold.

The tax rate for a company with a turnover of less than $50 million is 25%. For all other companies the tax rate is 30%. There’s no tax-free threshold for a company.

Compare business structures

A partnership or company business structure may be right for you.

Compare some of the differences to help you decide.

Partnership Company
Business decisions are made by: Partners Directors

Partners in a partnership share the business decisions equally.

Directors of a company are responsible for business decisions. You have full control if you’re the only director. If there’s more than one director, they follow rules set out in the company's constitution or replaceable rules.
Setting up your business costs: $44+ $597+

Set-up costs for a partnership may include:

  • business name registration – $44 for one year or $102 for 3 years
  • domain name registration and web hosting for a website
  • licences and permits depending on the industry
  • formal partnership agreement.

Set-up costs for a company are higher. They may include:

  • company registration – $597 for a proprietary limited company and an annual review fee of $321
  • business name registration – $44 for one year or $102 for 3 years
  • domain name registration and web hosting for a website
  • licences and permits depending on the industry.
Setting up your business is: Easy More complex

Setting up a partnership is relatively easy. On top of your registrations, licences and permits you need to set up a separate bank account.

Setting up a company is more complex. Make sure you understand your legal and tax obligations first. You also need to set up a separate bank account and have a registered office and principal place of business.
Changing business structures is: Easy More difficult

It is easy to change from a partnership to a different business structure if all partners agree.

It is not easy to change from a company structure. You need to voluntarily deregister or wind up the company depending on its assets. Winding up the company can be complicated.
Money belongs to: Partners Company

Partners tend to share the money in a partnership equally. They also equally own losses.

In a company the money your business earns belongs to the company. You keep the money in a separate bank account. You cannot use it to pay for personal expenses. There are rules about how to pay your shareholders and directors.
Losses are the responsibility of: Partners Company and directors

Partners are personally responsible for all payments, taxes, liabilities and losses in a partnership. If it's not an equal partnership our partnership agreement should say how much each partner will earn and how much they will pay to cover losses.

A company is responsible for payments, taxes, liabilities and losses. Directors may be personally responsible for losses in some cases or if they breach their duties.
Risk to personal assets is: High Low (for shareholders) to medium (for directors)

The liability of each partner in a partnership is unlimited. This means all personal assets in your name may be at risk if you owe business debts or someone sues your business. Your home and other assets could count towards paying off the debt even if another partner incurred the debt. A limited partnership structure can limit the risk to assets in certain cases – usually to protect silent partners who do not make decisions or run the business.

In a company your personal assets are not at risk. They’re separate from the company. Directors are only personally responsible for losses in some cases.
Tax rate that applies is: Individual tax rate 25% or 30%

In a partnership your business income is part of your personal income. Although the partnership must lodge a tax return, the partnership does not pay tax separately. If your total income is $18,200 or less you do not pay any tax. This is the tax-free threshold.

The tax rate for a company with a turnover of less than $50 million is 25%. For all other companies the tax rate is 30%. There's no tax-free threshold for a company.

Which business structure do you want to use?

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Which business structure do you want to use?

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Trust

Trust may be the right business structure for you.

A trust can be expensive and complex to set up. It’s often used to protect assets such as property for others (the beneficiaries).

Trustees are responsible for everything in the trust including income and losses. People or companies can be trustees.

Sole trader

Sole trader may be the right business structure for you.

A sole trader is the simplest form of business structure and can be inexpensive and easy to set up. It tends to suit people who:

  • want to be the only owner and have full control of the business
  • have a hobby or side hustle that has become a business.

As a sole trader you’re responsible for everything in your business including debts, losses and day-to-day decisions. You can employ people too.

Company

Company may be the right business structure for you.

A company can be expensive and complex to set up and run. It tends to suit people who:

  • expect their business income to be unpredictable
  • want to limit the risk of losing personal assets such as their home.

A company means your business is a separate legal entity from you. It has at least one owner (shareholder) and one director. You can be both.

Partnership

Partnership may be the right business structure for you.

A partnership can be inexpensive and easy to set up. It’s made up of 2 or more people (the partners) who distribute income or losses between themselves.

It can become difficult if partners disagree about business decisions. It’s a good idea to have a partnership agreement – a legal document that sets out the terms of your business and protects the interests of you and your partners.

Is your business an Indigenous business?

A First Nations person owns at least half your business.

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Business name

Is your business name different to your personal name?

You do not need to register your business name if it's your personal name (Joe Aaron Smith) or a shortened form (Joe Smith, J Smith or J A Smith). You need to register it if it's anything else (Joe Smith Plumbing).

It's a good idea to register a trade mark for your business name even if it's the same as your own name. A trade mark gives you exclusive rights to your business name.

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Do you want a business website?

You can register a website address (domain name) even if you're not ready to set up your website. It gives you a better chance of securing a domain name that reflects your business name.

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Employees

Will you hire employees?

Employees work in and are part of your business. Independent contractors, subcontractors and volunteers are technically not employees.

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Will you employ working holiday makers?

Working holiday makers are young adults who work in Australia while visiting from overseas. They hold either a working holiday visa (subclass 417) or work and holiday visa (subclass 462).

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Will you pay for benefits for your employees?

Benefits you pay for (that aren’t salary or wages) are called fringe benefits. They can include things like:

  • a car for private use
  • food and drink 
  • movie tickets.

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Intellectual property

Will you create a brand?

A brand is an identity for your business. It's how customers recognise your products and services. It can be made up of a:

  • logo
  • word or phrase
  • letter or number
  • sound, scent, picture or movement
  • part of packaging.

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Have you invented something?

Your invention must be original and useful. It can be a:

  • technology
  • device
  • substance
  • method
  • process.

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Do you have a product that looks new and different?

The overall visual appearance of your product can include the:

  • shape
  • colour
  • layout
  • pattern
  • decorations.

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Are you growing a new plant variety?

This includes all plants such as:

  • trees
  • flowers
  • shrubs
  • vines.

It also includes algae and fungi.

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Business taxes

Do you expect to turn over $75,000 or more in a 12-month period?

Turnover is your total business income (not your profit).

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Will you provide taxi, limousine or ride-sourcing travel for passengers?

This does not include services where you provide a vehicle only and no driver.

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Will you make, import or wholesale wine?

This means drinks that contain more than 1.15% of ethyl alcohol and are either:

  • grape wine (including sparkling and some fortified wine)
  • grape wine product (such as marsala)
  • fruit or vegetable wine
  • cider or perry (except for some flavoured ciders)
  • mead
  • sake.

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Will you make, store or sell other alcoholic drinks?

This includes locally made:

  • beer with an alcohol content of more than 1.15%
  • spirits such as brandy, whisky, rum, vodka and gin
  • liqueurs or pre-mixed spirit-based drinks.

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Will you use fuel for your business activities?

This means fuel used in:

  • light vehicles travelling on private roads
  • heavy vehicles
  • machinery
  • plant
  • equipment.

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Will you sell or import luxury cars?

This means cars that are worth more than $80,567 (or $91,387 for fuel-efficient cars), unless they are exempt from the luxury car tax.

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Results

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It appears some questions are unanswered

These have been marked as Unanswered in the ‘View and change your answers’ feature below. To make sure you don’t miss any registrations you may require, edit and answer the remaining questions.

Business structure

Company

Company may be the right business structure for you.

Partnership

Partnership may be the right business structure for you.

Sole trader

Sole trader may be the right business structure for you.

Trust

Trust may be the right business structure for you.

Required registrations

You will need these registrations for your business.

Recommended registrations

These registrations can help you run your business. Some may be required as your business grows.

Business structure

Do you know which business structure is right for you? Unanswered
Which business structure is right for you? Unanswered
How many people will own your business? Unanswered
Will your business hold assets for others? Unanswered
Compare business structures Unanswered
Compare business structures Unanswered
Which business structure do you want to use? Unanswered
Which business structure do you want to use? Unanswered
Trust Unanswered
Sole trader Unanswered
Company Unanswered
Partnership Unanswered
Is your business an Indigenous business? Unanswered

Business name

Is your business name different to your personal name? Unanswered
Do you want a business website? Unanswered

Employees

Will you hire employees? Unanswered
Will you employ working holiday makers? Unanswered
Will you pay for benefits for your employees? Unanswered

Intellectual property

Will you create a brand? Unanswered
Have you invented something? Unanswered
Do you have a product that looks new and different? Unanswered
Are you growing a new plant variety? Unanswered

Business taxes

Do you expect to turn over $75,000 or more in a 12-month period? Unanswered
Will you provide taxi, limousine or ride-sourcing travel for passengers? Unanswered
Will you make, import or wholesale wine? Unanswered
Will you make, store or sell other alcoholic drinks? Unanswered
Will you use fuel for your business activities? Unanswered
Will you sell or import luxury cars? Unanswered

Next steps

1. Save your results

Email or print your results to help you remember the registrations you need.

2. Apply for your registrations

You can apply for most registrations at the same time with the Business Registration Service.

This includes applying for your:

  • Australian Business Number (ABN)
  • business name
  • business tax file number (TFN)
  • company
  • fuel tax credits
  • goods and services tax (GST)
  • luxury car tax (LCT)
  • pay as you go (PAYG) withholding
  • fringe benefits tax (FBT)
  • wine equalisation tax (WET)
Apply now

Apply for a trade mark, patent, design right or plant breeder’s right with IP Australia.

  • Patent
  • Plant breeder's right (PBR)
  • Trade mark
  • Design right
Apply now

3. Consider other registrations you may need

This tool covers some basic registrations. You may need other registrations to start your business or as it grows.

4. Speak to an adviser

This is only a guide. If you're not sure about your business structure and registrations find an adviser to help you.

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Business structure

  • Company
  • Partnership
  • Sole trader
  • Trust

No chosen structure yet

Required registrations

  • Australian Business Number
  • Business tax file number
  • Company
  • Director ID
  • Individual tax file number
  • Business name
  • Pay as you go withholding
  • Employer of working holiday makers
  • Fringe benefits tax
  • Goods and services tax
  • Wine equalisation tax
  • Excise on alcohol
  • Luxury car tax

No recommendations yet

Recommended registrations

  • ATO online services for business
  • ATO online services for sole traders
  • Supply Nation supplier
  • Trade mark
  • Domain name
  • Patent
  • Design right
  • Plant breeder's right
  • Fuel tax credits

No recommendations yet