Types Of Business Structures

Get in touch: 1800 770 780

How can we help?

While starting a business, one of the major factors you should consider, is to decide upon a suitable business structure. The structure you choose depends on the size and type of your business. There are four main types of business structures namely:

Sole trader;


Company; and


Sole Trader

A sole trader is the simplest form of business structure. Here, the individuals trade on their own or can use a registered business name under the Australian Securities and Investments Commission (ASIC).

Advantages of Sole Trading

Operates in a simple set up;

Complete control asserted on the business by the trader; and

Fewer reporting requirements.

Disadvantages of Sole Trading

Unlimited liability, which means the personal assets of the individuals are at risk, if the things go wrong; and

Little opportunity for tax planning.


A partnership is considered to be an association of 2 or more persons, but not more than 20 people, who join to run a business together. The partners may either use a registered business name under the ASIC or may use the family names of all the partners.

Advantages of Partnership

Simple inexpensive set up;

Minimal reporting requirements;

Shared management and staffing responsibilities;

Combined skills, experience and knowledge providing a better product/service;

More opportunities for tax planning;

Relatively easy to dissolve or exit and recover share; and

Access to capital.

Disadvantages of Partnership

Each partner is responsible for the liabilities and debts incurred by other partners with or without one’s knowledge; and

Disputes may occur over profit sharing, administration control and business direction.


A company is a legal entity capable of holding assets in its own name and conducts a business in its own right. A company is owned by the shareholders and run by the directors. It has a unique nine digit Australian Company Number (ACN) appearing on company seal and every on public document.

Advantages of a Company Structure

Limited liability for shareholders;

Company structure is commercially accepted;

Ability to raise significant capital;

Profits can be reinvested in the company or paid out to the shareholders as dividends;

Easy to sell and pass on ownership; and

Company can carry forward losses indefinitely to offset against future profits.

Disadvantages of a Company Structure

Significant set up costs and maintenance costs;

Limited or no control of company affairs;

Complex reporting requirements; and

Company cannot distribute losses to its shareholders.


A trust is an entity that holds property or income for the benefit of others. In a trust, a trustee operates the business on behalf of the beneficiaries. It is set up through a trust deed and comprises of:

Discretionary Trusts (involving single family); and

Unit Trusts (involving multiple families).

Advantages of a Trust

Reduced liability, in case of corporate trustee;

Asset protection; and

Flexibility of asset and income distribution.

Disadvantages of a Trust

Can be expensive and complex to establish and administer;

Difficult to dissolve, dismantle, or make changes once established, particularly when children are involved;

Any profits retained to reinvest into the business, will incur penalty tax rates; and

Cannot distribute losses, only profits.

Each structure has advantages, disadvantages and responsibilities. One needs to carefully consider them before making a decision. If you would like to seek any guidance in relation to the different types of company structures, feel free to contact our team of experts at Owen Hodge Lawyers.

Acquisitions And Divestments Of Commercial And Industrial Properties
Businesses Outsourcing and Exporting
Directors Duties
Partnership Disputes
Reviewing Chinese Product Disclosure Statements
Shareholder Disputes
Types Of Business Structures
Business Sale and Purchase

Buying Or Establishing A Small Business
Purchase and Sale of a Business
Sale Or Purchase Of A Business – The Contract Process

Business Succession Planning
Changes to the Liquor Act – Will there be Boutique Bars?
Contracts and Businesses
Debt Recovery

Debt Recovery: The Process in NSW
Steps To Prevent The Need To Recover Debt
Once your Company has been Served with a Statutory Demand
The debt recovery process

Dissolution of Your Company
Foreign Investment in Australia (The FIRB)

Franchising Your Business In Australia
How To Secure Your Loan, Credit Or Goods
Joint Venture Agreements
Land and Environment Laws Particular To Developers
Partnership Agreements
Self-Managed Superannuation Fund
Shareholder Agreements
Trusts and Trust Deeds
What to Know in Construction Contract

Talk to Owen Hodge Lawyers

Owen Hodge is here to help.

Get in touch now