When you first start a business, you'll need to decide on its structure. Your business structure identifies how you operate as a trading business. It'll affect things like:

  • who can make important decisions
  • tax advantages and disadvantages
  • how profits and losses are shared
  • legal obligations and costs

You can change your business structure as your business grows or situation changes.

Popular business structures

For new businesses, the 3 most popular business structures are:

  • sole trader – this is a simple business structure that gives the owner all the decision-making power.  Business losses can be written off your PAYG tax from another job. You can also hire staff if you want to.
  • partnership – this is when between 2 and 20 people go into business together. Partnerships can be either general or limited, depending on the liability of the partners.
  • company – usually, a company has members (shareholders) who own the company and directors who run it. Or an independent contractor can also set up a 'one-person company' with a sole director and member. Companies can also be publicly listed, which means the public can buy shares to invest in the company

Once you understand the difference between these structures, you can choose the best one for your business.

Important differences at a glance

FeaturesSole traderPartnershipCompany
Simple business structureYesNoNo
Can be owned and run by one personYesNoYes
Low initial set-up feesYes ($33)No ($359.90)No (Limited share capital – $444)
Can hire staffYesYesYes
Receives tax benefits
  • Only when profits are low.
  • Enjoys tax-free threshold.
Yes, especially if partners are in the same family.Yes, but does not enjoy tax-free threshold.
Relatively easy to attract capitalNoNoYes, because of limited liability
Relatively easy to operate globallyNoNoYes
Responsibility to pay your own superYesYesYes
Collective or personal responsibility for debts or lossesPersonalCollectivePersonal if personal guarantee undertaken
Relatively easy to close downYesNoNo

Choosing your business structure

Use our step-by-step guide to help you decide. You can change your structure as your business changes so pick what's best for you now.