Structure is the decision that quietly shapes everything after it: how much tax you pay, what happens if the business is sued, how easily you bring in a partner or sell. There is no universally right answer, only the right answer for your situation, which is why this is a conversation between your accountant and a business lawyer rather than a web form.
Sole trader: simplest, most exposed
Cheap to start, minimal admin, profits taxed at your marginal rates. The trade-off is total exposure; there is no legal line between you and the business, so business debts and claims reach personal assets. Right for low-risk starts; outgrown quickly once income or risk grows.
Company: the limited-liability workhorse
A company is a separate legal person; it contracts, owes and is sued in its own name, and shareholders’ exposure is generally limited to their investment. Profits are taxed at the company rate, which can sit well below top personal rates. The costs: ASIC obligations, directors’ duties (which are personal and real), and rules around taking money out; loans to shareholders are a classic trap.
Trust: flexibility with discipline required
Discretionary (family) trusts allow income to be distributed among beneficiaries each year, which can be tax-effective for family businesses, and they offer a layer of asset separation. In exchange: a trustee with legal duties, a deed that must be followed to the letter, and annual resolutions that must actually happen before 30 June. Many businesses pair a trust with a corporate trustee.
When to revisit
Restructuring has tax consequences (CGT among them), but rollovers and concessions often soften the path; another reason the accountant and the lawyer should be in the same room. We provide both, around one table.
- Income has grown well past where the structure was chosen
- Taking on a business partner or investor
- Risk profile changed: bigger contracts, staff, premises
- Succession or sale is on the horizon