Choose the right business structure
Save money and protect yourself
On this page
- The impact of different structures
- Step-by-step selection tool
- Ready reckoner for popular structures
The impact
Business structures impact on who can make important decisions, tax advantages and disadvantages, how profits and losses are shared, legal obligations and costs. 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.
Step-By-Step: Choose the best business structure for you
Three most popular business structures
For new businesses, the three most popular business structures are sole trader, partnership and company. The structure identifies your operation as a trading business.
Knowing the differences between these structures and choosing what's best for your business can put you in the most favorable tax and legal position.
Sole trader
A sole trader is a simple business structure that gives you, the owner, all the decision making power. You can also hire staff if you want to. Business losses can be written off your PAYG tax from another job
Partnership
A partnership is formed when two or more people (up to 20) go into business together. Partnerships can either be general or limited.
Company
A company has members (shareholders) who own the company, and directors who run it. However, if you're an independent contractor you can set up a 'one person company' with a sole director and member. Companies can also be listed as public companies, meaning the public can buy shares to invest in the company.
The differences at a glance
|
Sole Trader |
Partnership |
Company |
Co-operative |
|
|
Simple business structure |
Yes |
No |
No |
No |
| Can be owned & run by one person? |
Yes |
No |
Yes |
No |
| High initial set-up fees? |
No ($33) |
Yes ($359.90) |
Yes (Limited share capital - $444) |
Yes ($393.10) |
Can hire staff? |
Yes |
Yes |
Yes |
Yes |
| Tax benefits? |
Only when profits are low. Enjoys tax-free threshold |
Yes, especially if partners are in the same family |
Yes, but does not enjoy tax-free threshold |
Yes, but does not enjoy tax-free threshold
|
| Relatively easy to attract capital? |
No |
No |
Yes, because of limited liability |
Capital comes from members who have limited liability |
| Relatively easy to operate globally? |
No |
No |
Yes |
Yes |
| Pay your own super? |
Yes |
Yes |
Yes |
Yes |
Collective or personal responsibility for debts/losses |
Personal | Collective | Personal if personal guarantee undertaken | Limited liability for shareholders |
Relatively easy to close down? |
Yes |
No |
No |
No |
State Government of Victoria
© Copyright DJPR 2019
Page updated: 10 Jan 2019