When you first start a business, you'll need to decide on its structure. Your business structure identifies how you operate as a trading business. It'll affect things like:
- who can make important decisions
- tax advantages and disadvantages
- how profits and losses are shared
- legal obligations and costs.
You can change your business structure as your business grows or situation changes.
Popular business structures
For new businesses, the 3 most popular business structures are:
- sole trader – this is a simple business structure that gives the owner all the decision-making power. Business losses can be written off your PAYG tax from another job. You can also hire staff if you want to.
- partnership – this is when between 2 and 20 people go into business together. Partnerships can be either general or limited, depending on the liability of the partners.
- company – usually, a company has members (shareholders) who own the company and directors who run it. Or an independent contractor can also set up a 'one-person company' with a sole director and member. Companies can also be publicly listed, which means the public can buy shares to invest in the company.
Other business structures include:
Once you understand the difference between these structures, you can choose the best one for your business.
Important differences at a glance
| Features | Sole trader | Partnership | Company |
|---|---|---|---|
| Simple business structure | Yes | No | No |
| Can be owned and run by one person | Yes | No | Yes |
| Low initial set-up fees | Yes ($33) | No ($359.90) | No (Limited share capital – $444) |
| Can hire staff | Yes | Yes | Yes |
| Receives tax benefits |
| Yes, especially if partners are in the same family. | Yes, but does not enjoy tax-free threshold. |
| Relatively easy to attract capital | No | No | Yes, because of limited liability |
| Relatively easy to operate globally | No | No | Yes |
| Responsibility to pay your own super | Yes | Yes | Yes |
| Collective or personal responsibility for debts or losses | Personal | Collective | Personal if personal guarantee undertaken |
| Relatively easy to close down | Yes | No | No |
Choosing your business structure
Use our step-by-step guide to help you decide. You can change your structure as your business changes so pick what's best for you now.