Business Structures: Choosing the Right Legal Structure for Your Business

There are various types of Business Structures in Australia, and these are governed by different pieces of legislation.

The four main types of business structures in Australia are:

• Sole trader/Individuals
• Partnership
• Company
• Trust

Each business structure has its own unique characteristics and allow the business owners to operate and distribute profits (or losses) in a different manner. There are considerations about the governance, liability, management, taxation and compliance that you need to take into account.

A sole trader operates as an individual and has unlimited personal liability for their business debts and obligations. If you are a sole trader you will need to consider the treatment of tax and importantly any liabilities. Being a sole trader may often be a cheaper option compared to a company or trust structure, but can be limiting in terms of structuring any tax obligations and certainly not suitable as your business expands.

A partnership involves two or more people sharing the profits and losses of the business and sharing joint and several liability for the debts and obligations of the partnership. A business partnership may be formed without formal documentation and is governed by State based legislation across Australia.

Business partnerships are often used in smaller Australian businesses and often in husband-and-wife business ventures. There are legal considerations that need to be made to make a dissolution or split in the partnership less stressful. Partnerships can be used successfully, but many issues arise when the business partners disagree or are in conflict. The future operations and end of a business should be carefully reviewed by business partners.

Proper documentation of the business partnership will ensure the business partners understand their rights and obligations and minimise disputes. Read more about business partnerships here.

A company structure has more governance and compliance as it is regulated by Australian Securities and Investment Commission (ASIC). Directors run the company and shareholders own the company. Company directors can have less liability in certain instances.

Companies are easy to setup, and commercial lawyers help setup the company structure and ensure that any deeds and rights are documented as you desire. There are more options with company structures, such as different class of shares and you can change directors out easily. You can also alter the company constitution to customise how the company operates.

A company trust is where the Trust manages the assets for the benefit of beneficiaries according to the trust deed. Shares are held by the Trust and this gives the Trustee the right to make distributions of profits to the beneficiaries in accordance with the provisions of the Trust Deed.

We can guide you through the legal requirements, risks, and opportunities of different business structures and assist you in making an informed decision that aligns with your commercial goals.

When choosing the right business structure you should consider factors, such as your business objectives, industry, size, ownership, intellectual property, financing, taxation, liability, succession planning, and your future growth. The cost of maintaining the desired structure on a yearly basis should also be considered.

Our commercial lawyers can advise you on the pros and cons of each business structure and help you determine which one best suits your needs.

Our lawyers will also advise on and draft the relevant legal documents, such as partnership agreements, shareholder agreements, trust deeds, and company constitutions.

Seeking legal advice on business structures from PCL Lawyers will allow you to make a considered decision and our business law service benefits include:

Extensive Legal expertise: Our commercial lawyers have extensive experience in advising businesses on all their legal matters and can provide tailored legal advice. We understand the common issues business owners face and can clearly explain complex legal issues you need to be aware of.

Commercial understanding: We understand the commercial implications of business structures and can advise you on the legal aspects that align with you achieving your business goals. As commercial lawyers our business clients rely on the documents we create and we ensure our documentation is thoroughly drafted to pre-emptively deal with issues that commonly arise with such structures as much as possible.

Risk management: We can help you mitigate legal and financial risks associated with the business structure you choose. We can also explain the legal requirements for compliance.

Cost-effectiveness: Obtaining professional and skilled legal advice before choosing your business structure you can often save money and avoid litigation or issues in the long run. Changing business structures once you have commenced operations can be time consuming and expensive.

Security: Knowing that you have proper documentation in place can give you peace of mind as many common business disputes will already be allowed for. A properly considered business plan will allow you to focus on growing your business.

If you are starting a new business or considering changing your business structure, contact Our experienced business structure lawyers in Melbourne, Sydney or Brisbane for considered and expert legal advice.

Our business lawyers can provide you with practical and concise legal advice that takes considers all of your enterprises unique circumstances.

We can help you navigate the legal issues and make an informed decision that protects your interests whilst maximises your opportunities.

Call us today to book a consultation with one of our commercial lawyers or submit your details via a contact form for a callback.