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Last edited 20 Jan 2021
Business structures commonly used by small businesses in Australia
The four main business structures commonly used by small businesses in Australia are:
- Sole trader: an individual operating as the sole person legally responsible for all aspects of the business. Like other structures, as a sole trader you can employ people to help you run your business.
- Company: a legal entity separate from its shareholders.
- Partnership: an association of people or entities running a business together, but not as a company.
- Trust: an entity that holds property or income for the benefit of others.
When deciding on a structure for your business, choose the one that best suits your business needs, keeping in mind that there are advantages and disadvantages for each structure. It's important to investigate each option carefully, as choosing your business structure is an important decision.
- the licenses you require how much tax you pay
- whether you're considered an employee, or the owner of the business
- your potential personal liability
- how much control you have over the business
- ongoing costs and volume of paper work for your business.
It is important to note that you can change your business structure throughout the life of your business. As your business grows and expands, you may decide to change your business structure, or to restructure your business.
Obtaining legal or other professional advice can help you understand your own particular circumstances. Speak to your accountant, or use our Advisor Finder tool to find a business adviser, when deciding on your business's structure and type. It is important to determine your business structure and business type before you register a business or company as the steps may differ.
|Main Advantages||Main Disadvantages|
Limited Liability, in case the company goes in to financial difficulty, the assets and personal finances of shareholders are protected beyond value of their shareholding. Tax efficiency, more opportunity and great flexibility is offered by limited companies in the case of taxation on profits and on personal income
There are certain restrictions with regard to the company name.
Easy to attract investors as they are only liable for their total amount of their investment into the business The limited partners enjoy limited liability for any debts, judgments or other liabilities of the business
The general partners are more free to focus their attention on the business
|Limited Liability Company (LLC)||
Owners of the business enjoy limited liability for the business' debts, judgments and other liabilities, even if the owners engage in significant control of the business The business profits and losses can be allocated to the owners along different lines than ownership interest (for example, a 10% owner may be allocated 30% of the business' profits)
|More expensive to establish than a sole proprietorship or partnership|
|Professional Limited Liability Company||Allows state licensed professionals to enjoy the same advantages as a LLC|
|Limited Liability Partnership||
Partners take their share of loss or gain on their personal income taxes
Often limited to only a select few professions
 Find out more
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