Business Structure – Sole Trader, Partnership, Trust, Company …?

Our Business Lawyers with lawyers in Brisbane & on the Gold Coast can help you answer that question.

The answer is going to depend on your circumstances and factors like -  the type of business, the size of the business and your plans for the future.

Here is some information to get you started.

Sole Trader

Definition: As a sole trader you are the sole business owner and trade in your own name. (e.g. Fred Smith Plumber).

• Name – You can usually trade in your own name without having to register a business name
• Simple – your customers / clients know precisely who they are dealing with
• Staff – sole traders can have staff. You do not need to all the work
• Tax – you pay tax at your personal marginal tax rates
• GST – the GST rules still apply
• Risk – your personal assets are at risk from liabilities you may incur in the business

Partnership

Definition: A partnership is two or more persons carrying on a business together with a view to a profit.

• Name – You will usually have to register a business name
• Partnership Deed – You and your partner(s) need to be clear about your obligations and rights
• Tax – the partners pay tax at their respective tax rates
• Risk – partners are generally personally liable for the liabilities that arise in the business
• Rest – a partner can make it possible to take a break

Trust

Definition: A trust is a relationship where the trustee carries on a business for the benefit of certain benificaries.

• Trustee – A trust can only conduct business via a trustee. A trustee can be a natural person(s) or a company
• Type – there are different types of trusts – discretionary (family) trusts, unit trusts and hybrid trusts
• Tax – Income splitting – the trustee can split income to beneficiaries with tax paid at their respective tax rates
• Asset protection – trust assets and personally owned assets can often be kept separate. Careful consideration in drafting of the trust is needed here.
• Penal tax  – penal tax is levied on retained earnings

Company

Definition: A company is a legal person (apart from its directors and shareholders) providing limited (”Ltd”) liability protection.

• Single director and shareholder is all that is needed
• Tax – a flat 30c in the dollar tax rate applies
• Asset protection – company liabilities generally remain in the company
• Retained earnings – can be accumulated (and only taxed at the 30c in the dollar flat tax rate)
• Dividend franking – dividends can be franked or unfranked

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