Setting up a business structure for a small business

If you are starting a small business you will need to work out which type of business structure to use. This page explains the benefits and disadvantages of some different types of business structures.

Help choosing a business structure
Sole trader
Partnership
Company
Trust
Differences between a sole trader, partnership, company and trust
Contractual arrangements including joint ventures

Help choosing a business structure

Business.gov.au has more information on types of business structures and a great Business registration - help me decide tool that can help you work out the business structure that will best suit your needs.

You should also seek advice from a professional business adviser, like a lawyer or an accountant.

ASIC does not register trusts, partnerships or joint ventures, we only register companies and business names. Please see Registering a company and What business name holder details you need to provide for further information.

Sole trader

A sole trader is the simplest business structure. It is inexpensive to set up and there are generally less compliance and legal requirements.

If you operate as a sole trader, there is no legal separation between you and the business. This means you’re responsible for all aspects of the business, including any debts the business incurs. Unlike operating under a company structure, there are no limits on liability.

You do not need to register the business with ASIC unless you are conducting business under a name other than your personal name. See registering a business name for information on how to register.

To find out about the differences between a sole trader and a company visit business.gov.au.

Partnership

A partnership is two or more people or entities who do business as partners or receive income jointly.

In a partnership, control or management of the business is shared. A partnership is not a separate legal entity, so you and your partners are liable for all debts and obligations of the business. A formal partnership agreement is common, but not essential.

The information you need to provide when registering a business name depends on who holds that name. Find out more about the steps to register a business name.

Company

A company is a separate legal entity. This means it has the same rights as a natural person and can incur debt, sue and be sued.

Liability is limited. However, a company is a more complex business structure compared to operating as a sole trader, with higher set-up and administrative costs and higher levels of legal responsibilities imposed on both the company and directors.

You must register the company with ASIC. Company officers must also comply with other legal obligations under the Corporations Act. Find out more about starting a company.

Compare setting a company and a sole trader on business.gov.au.

Trust

A trust is an obligation imposed on a person, the trustee, to hold property or assets (e.g. business assets) for the benefit of others (known as beneficiaries).

Setting up a trust requires a formal trust deed, as well as the completion of yearly administrative tasks. If the business is operated through a trust, the trustee is responsible for its operation.

A trustee can be a company registered with ASIC. If the trust does business under a name other than its own, that name must be registered as a business name with ASIC.

Differences between a sole trader, partnership, company and trust

Here is a snapshot of the key differences between each type of business structure:

Component	Sole trader	Partnership	Company	Trust
Complexity of business structure	Simple	Moderate	Complex	Highly complex
Cost	Low	Medium	Medium to high	High
Legal obligations	Low	Low to medium	High	Medium
Separate legal entity	No	No	Yes	Yes
Liability	Unlimited	Unlimited	Limited	Limited (with a corporate trustee)

Contractual arrangements including joint ventures

Two or more individuals, Partnerships, Companies or Trusts can enter into contractual arrangements in order to carry out a particular project or projects. These arrangements should have a written contract and can be by way of a joint venture agreement. Find out more about joint ventures at business.gov.au.