Business Structures Made Simple

Today, in 4 minutes or less, you'll learn:   

1. Choosing the right legal structure is crucial for your business, with three main options in Australia: sole trader (low cost, complete control), partnership (shared responsibilities), and company (growth-focused, asset protection).  
2. Each structure has unique benefits and considerations.  
3. The best choice depends on your personal risk tolerance, growth plans, and willingness to handle administrative responsibilities - and seeking professional advice from an accountant or lawyer is always recommended. 

When starting a business, one of your first decisions is choosing the best legal structure. Sole trader? Partnership? Company? Which option is best?  

It's essential to pick the one that protects you, supports your growth and sets you up for success. Making informed decisions, understanding your options, and feeling totally in control of your business journey is easier than you may think.   

Here's a breakdown of the main options available in Australia:  

#1 Sole Trader  

What is it? A simple structure where you run your business as an individual. Perfect for solo mums wanting maximum control.  

Benefits:  

• Easy and inexpensive to set up.  
• Complete control of your business decisions.  
• You are taxed as part of your personal income.  

Considerations:  

• You're personally liable for debts.  
• Limited capacity to raise funds or share responsibility.  
• Higher personal marginal tax rates at higher income levels compared to company tax rates (these are constantly changing, so check the latest rates on the ATO website). 

#2 Partnership  

What is it? A business owned and operated by two or more people. It's great if you're teaming up with another fantastic mum. 

Benefits:  

• Shared responsibility and decision-making.  
• Combines skills, resources, and capital.  
• Relatively simple to set up.  

Considerations:  

• Partners share liability for debts.  
• Potential for disagreements.  
• Profits are shared and taxed at individual rates (higher than company tax rates at the higher income levels).  

#3 Company  

What is it? A legal entity separate from its owners, offering limited liability. Smaller businesses will become private companies (compared to larger public companies, which can also be listed on the stock exchange). The company structure is the growth-minded mum's option.  

Benefits:  

• Limited personal liability for business debts. If the business gets into trouble, your personal assets will not be taken to cover debts.  
• If you are sued for any reason, the company will be sued rather than you personally.  
• Easier to attract investors.  
• Suitable for businesses aiming for growth. 

Considerations:  

• It is more complex and costly to set up. It will generally involve the need to engage an accountant to set up, but also to help manage ongoing.  
• Requires ongoing reporting and compliance with ASIC regulations.  
• Company profits are taxed separately (generally at a lower tax rate compared to personal tax rates at higher income levels). 

Key Questions to Ask Yourself: 

• How much personal risk am I comfortable with?  
• Do I want to grow big or keep it lean?  
• Do you want to run the business alone or with partners?  
• How much admin are you willing to handle? 

Pro Tip: Always seek professional advice from an accountant or lawyer to ensure you make the best choice for your circumstances.  

Ready to take the next step? Pick one thing today - just ONE thing - to move your business structure forward. It could be booking a 30-minute chat with an accountant or researching your options.  

Building a business is exciting, but the right foundation matters. Whether you're flying solo or partnering up, there's a structure that's perfect for your dream.