Starting a small business

If you are thinking of starting a small business, you will need to look at the benefits and disadvantages of different business structures and work out which structure best suits your requirements.

Choosing the right business structure

The most common types of business structures are:

Before deciding which business structure to use, we recommend you seek advice from a professional business adviser – for example, a lawyer or an accountant. This is especially important for trusts and partnerships as the law on these structures can be complex.

Company

Benefits / disadvantages

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. The company’s owners (called ‘members’ or ‘shareholders’) can limit their personal liability and are generally not liable for company debts (unless they give personal guarantees to borrow money). Companies are taxed at a different rate.

Your obligations

You need to register the company with ASIC. Company officers must comply with other legal obligations under the Corporations Act.

Learn more about starting a company

Sole trader

Benefits / disadvantages

As a sole trader, you are personally liable for debts the business incurs (there are no limits on this liability).

Your obligations

You do not need to register the business with ASIC, but you may need to register its name. See Registering a business name.

Partnership

Benefits / disadvantages

In a partnership, you and your partners are personally liable for all debts and obligations of the business. There are potentially no limits on this liability, as a partnership is not a separate legal entity.

Your obligations

You do not need to register the business with ASIC, but you may need to register its name. See Registering a business name.

Trust

Benefits / disadvantages

Using a trust structure for your business may have certain advantages – for example, from a tax perspective.

Your obligations

You do not need to register the trust with ASIC (unless you are operating a company that is a trustee for a trust).

As with partnerships, you may need to register the trust's name.

See Registering a business name

Protect your business from unfair contract terms

Pen1 

Find out more about the new law applying from 12 November 2016 that aims to protect small businesses from unfair contract terms.

Watch the webinar video


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Last updated: 04/11/2013 12:00