When starting a business, it must be determined how the business will be setup. Deciding a type of structure to be used to run the business is the first step. At XYZ Accounting we advise the best suitable structure for your new business.

XYZ Accounting can set up any of the below business structures

Company ASIC Registration Package

Trust Setup

Partnership Setup

Sole Trader ABN Registration

New Business Setup service also includes

Tax File Number Registration

ABN Registration

GST Registration

PAYG Withholding Registration

Choosing the right business structure for you can be difficult. It's usually driven by such factors as the kind of business you're going to start? How many people will be invloved in the business? How much income you think it's going to create? Am I going to hire staff?, am I planning on growing? Do I want to reduce my risks?

There are four different types of business structures. Before chosing which is right you, read the description and key aspects below. Still not sure? Feel free to contact us, we are happy to help.

Company ASIC Registration Package

A company is a separate legal entity, unlike a sole trader or a partnership structure. This means the company has the same rights as a natural person and can incur debt, sue and be sued. The company’s owners (shareholders) can limit their personal liability and are genrally not liable for debts the company has incurred.

A company is a complex structure, with higher setup costs and administrative requirements because of additional reporting.

Key aspects

• Is a separate legal entity
• Has limited liability compared to other structures
• Is a more complex business structure to start and run
• Involves higher set up and running costs than other structures
• Requires you to understand and comply with all obligations set out under the Corporations Act
• Means that business operations are controlled by directors and owned by the shareholders
• Must be registered for Goods and Services Tax (GST), if the annual turnover is $75,000 or more. The registration threshold for non-profit organisations is $150,000
• The money the business earns belongs to the company
• Requires an annual company tax return be longed with the ATO

Read more about company business structure on the Australian Taxation Office (ATO) website.

Trust Setup

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

Key aspects

• Require a formal trust deed that outlines how the trust operates
• Require the trustee to undertake formal yearly administrative tasks
• If you operate your business as a trust, the trustee is legally responsible for its operations. A trustee can be a company, providing some asset protection

Read more on trust obligations on the ATO website 

Partnership Setup

A partnership is a business structure that involves a number of people who carry on a business together. You may choose a partnership over a sole trader, if you’ll be jointly running the business with another person or a number of people (up to 20).

There are two types of partnerships, general and limited.

Key aspects

• It requires a separate TFN
• If you are carrying on an enterprise you can apply for an Australian Business Number (ABN) but this is not compulsory
• It is not a separate legal entity, like a company. Just like a sole trader, a business partners of a partnership are personally liable for the debts of the business
• You have shared control and management of the business with your partners
• The partnership is not liable for income tax. Each of the partners pay income tax on the share of the net partnership income you each receive  
• A partnership tax return must be lodged with the Australian Taxation Office (ATO) each year
• Each partner is responsible for their own superannuation arrangements, you are not an employee of the partnership
• The partnership must be registered for GST if the annual income turnover is $75,000 or greater

Read more about partnerships on the ATO website.

Sole Trader ABN Registration

A sole trader business structure is generally an individual operating on their own. This is the simplest business structure you can chose when starting a business. As a sole trader, you’ll make all the decisions about the starting and running of your business.

Unlike a company business structure, a sole trader is legally responsible for all aspects of the business, including debts and losses, which cannot be shared.

Key aspects

• Simple to set up and operate
• Fewer reporting requirements and is generally a low cost structure
• Allows you to use your individual TFN to lodge tax returns
• Has unlimited liability. You are legally liable for all debts and losses incurred by the business. All your personal assets are at risk should something go wrong. Your assets can be seized to recover any debts
• Any losses incurred by your business may be offset against other income earned, such as wages, or investment income. Subject to conditions
• Unlike a company structure, you are not required to operate a separate business bank  account. You can use your personal bank account, but must keep records for at least 5 years.
• You are not considered an employee of your own business and are free of any obligation to pay payroll tax, superannuation contributions or workers compensation on income from the business
• Its relatively easy to change the business structure if your business grows, or if you wish to wind things up and close your business
• You can not split business profits or losses made with family members and you are personally liable to pay tax on all the income derived   

Read more about sole traders on the ATO website.

More information....

- To understand more about the main types of business structures refer to the ATO website.

- Go to the Australian Securities and Investment Commission (ASIC) to find out which business structure is suited for you.