Business Structures

Your business structure decides who is liable for business debts and how profits are taxed. It also affects how easily the business can be sold. Our commercial lawyers advise Brisbane business owners on choosing, establishing and changing structures. We work alongside your accountant, who advises on the tax side.

The four common business structures

Sole trader

A sole trader runs the business in their own name. It is the simplest and least expensive structure to start. However, there is no separation between you and the business. You are personally liable for every business debt, and profits are taxed at your personal rates.

Partnership

A partnership is two or more people trading together for profit. Each partner pays tax on their share of the profit at their own rate. Partners can be liable for the whole of the partnership's debts, not just their share. A written partnership agreement is essential.

Company

A company is a separate legal entity. It owns its assets, signs its contracts and is generally liable for its own debts. Shareholders own it and directors run it, although in small businesses they are often the same people. A company that qualifies as a base rate entity currently pays tax at 25 percent. Every director needs a director identification number and takes on legal duties.

Trust

In a trust, a trustee holds the business assets for the benefit of beneficiaries. A family or discretionary trust lets the trustee decide each year how income is distributed. A unit trust gives each holder a fixed share, which suits unrelated owners. Most trusts use a company as trustee, to limit personal liability.

Comparing the structures

Structure	Liability	Tax	Cost to set up and run	Often suits
Sole trader	Unlimited and personal	Your personal rates	Lowest	Low risk businesses starting out
Partnership	Unlimited and shared	Each partner’s own rate	Low	Family businesses and small practices
Company	Generally limited to the company	Company tax rate	Moderate	Growing businesses with outside risk
Trust with a company trustee	Generally limited to the trustee	Taxed in beneficiaries’ hands	Highest	Family businesses wanting flexibility

This table is a general guide only. The right structure depends on your circumstances, so tax advice from your accountant is essential.

Limited liability is not complete protection

A company or corporate trustee does not protect its directors in every case. Directors can become personally liable for insolvent trading and for some unpaid tax and superannuation. Lenders and landlords usually ask directors for personal guarantees, which sit outside the company structure entirely. A structure reduces risk. It does not replace careful contracts.

Trusts: points to watch

A trust is only as good as its deed. The deed sets out who the beneficiaries are, what the trustee can do and when the trust ends. It also names the appointor, who can replace the trustee and therefore controls the trust. On a death or relationship breakdown, control of the appointor role often matters more than the business itself.

Agreements between owners

If there is more than one owner, the structure needs a second document setting out the deal between them. For a partnership, that is a partnership agreement. For a company, it is a shareholder agreement. For a unit trust, it is a unit holders agreement. Each one covers control, funding and what happens when an owner leaves.

Changing structure later

Businesses often outgrow their first structure. Moving from sole trader to company means transferring the assets, contracts, lease and staff to the new entity.

That transfer can have duty and tax consequences, although rollover relief may be available for some small businesses. Leases, finance and licences each need consent or replacement. The earlier the structure is right, the less a change costs.

How we can assist

Advising on structure options with your accountant
Registering companies and preparing constitutions
Preparing trust deeds and appointing trustees
Partnership, shareholder and unit holder agreements
Restructuring a business and transferring its assets
Leases and licences between related entities

We generally quote company and trust establishment as a fixed fee. You know the cost before anything is registered.

COMMON QUESTIONS

Frequently asked questions

Do I need a lawyer or an accountant to choose a structure?

Ideally both. Your accountant advises on tax. We advise on liability, control, the documents and how the structure works with your leases and contracts.

Which structure is best for a small business?

There is no single answer. It depends on risk, income, the number of owners and future plans, including a sale.

Can I change my structure later?

Yes, but it involves transferring assets and contracts, and may trigger duty and tax. It is usually cheaper to choose carefully at the start.