When starting or growing a business, one of the most important decisions you will make is how you structure it. This isn’t just a tick-box exercise or a formality for the ATO – your business structure shapes how you pay tax, protect assets, and even how you grow in the future.
At Palfreyman Chartered Accountants, we often meet business owners who have “just gone with what seemed easiest at the time.” While that is common, the truth is your structure can either support your business journey or hold it back. Below we will break down some of the common types of structures, who they tend to suit the most, and what their impacts are.
Sole Trader
A sole trader structure is the simplest way to start. It is inexpensive and straightforward, making it appealing for many new business owners. The trade-off to convenience is that the owner and the business are one and the same – meaning you carry full personal liability for any debts or claims.
Best for: freelancers, micro-businesses, or anyone testing an idea that is low risk.
Partnership
A partnership shares the load between two or more people. It is relatively simple to set up and allows owners to pool skills and resources. However, partners also share the risks, and disagreements can make this structure difficult to manage without clear agreements in place.
Best for: small businesses with two or more owners working closely together, who have clear alignment and trust.
Company
A company is a separate legal entity, meaning your personal assets are better protected. Companies also often bring tax advantages, especially as your profit grows. The trade-off is more compliance, reporting and upfront cost.
Best for: businesses looking to grow, employ staff or take on more risk.
Trusts
Trusts can be powerful structures for protecting assets, distributing income, and planning for the future. They are more complex to set up and require ongoing management, but they offer flexibility in how profits are shared between beneficiaries.
Best for: family businesses, those with significant assets, or anyone focused on longer-term wealth planning.
Blended Structures
While it is useful to think about each structure as a standalone option, many businesses end up using a combination. This can add complexity, but it also creates flexibility and long-term advantages.
For example, we can use a trust as a shareholder for a company. The company provides limited liability and a platform for growth, while the trust allows income to be distributed flexibly to beneficiaries. This approach can also make succession planning smoother, particularly if the owners plan to sell the business in the future.
Blended structures aren’t for every business, but they can be powerful tools when growth, asset protection or succession planning are the key priorities. The important thing is to get advice before setting any structure up – restructuring later can be costly and disruptive.
In Summary: Why Structure Matters
The structure you choose impacts:
- Tax – how much you pay, and when.
- Risk – how exposed your personal assets are.
- Succession – how easy it is to pass the business on.
- Flexibility – your ability to adapt as the business grows.
A decision made in the early days can either save or costs thousands down the track.
How We Can Help You
Our team works alongside clients to review their goals, risks and future plans, and then recommend the structure that will give them the best clarity and confidence. Often, the best results come from taking a step back and aligning the structure with the bigger picture – not just what is the cheapest or fastest today. If you are considering the right structure for your business, or whether a blended option might work best, our team can help you make a confident start. Read more about our Business Structuring & Setup services, and get in touch with us here.
Remember, the right structure doesn’t just get you started – it sets you up for long-term success.
