Business Structures Explained: Company, Trust, Partnership & Sole Trader
When launching or growing a business, one of the most important decisions you’ll make is choosing the right business structure.
The structure you select affects your tax obligations, asset protection, risk exposure, and long-term growth potential.
At Sterling Business Advisory, we work closely with clients to help them understand the benefits and hurdles of
operating as a sole trader, partnership, company, or trust, ensuring their business is structured for lasting success.
Sole Trader – Simple & Cost-Effective
A sole trader structure is the easiest and most affordable way to start a business.
Advantages:
- Complete control over all business decisions.
- Minimal setup costs and simple reporting.
- Straightforward to manage.
Considerations:
- No asset protection or legal separation – you’re personally liable for all debts.
- Profits taxed at personal marginal rates (which may not be tax-efficient as your income grows).
Partnership – Shared Ownership & Responsibility
A partnership involves two or more people running a business together.
Advantages:
- Easy and inexpensive to establish.
- Shared management, skills, and financial input.
- Income distributed among partners for tax purposes.
Considerations:
- Partners are personally liable for debts and legal obligations.
- Disputes can arise without a clear partnership agreement.
- Less flexibility for growth or succession planning.
Company – Protection & Professionalism
A company structure is a separate legal entity that offers greater protection and scalability.
Advantages:
- Limited liability for shareholders.
- Flat corporate tax rate (25% for base rate entities).
- Improved credibility with lenders and investors.
- Suitable for long-term growth and reinvestment.
Considerations:
- Higher setup and compliance costs.
- More detailed record-keeping and ASIC reporting obligations.
Trust – Flexibility & Asset Protection
A trust allows income and assets to be held for the benefit of others (the beneficiaries).
Advantages:
- Tax-effective distribution of profits to beneficiaries.
- Strong asset protection when structured correctly.
- Common for family businesses and wealth-building strategies.
Considerations:
- Higher establishment costs than some other structures.
- Annual trust resolutions and ongoing compliance required.
Which Structure is Right for You?
There is no one-size-fits-all solution. The right choice depends on your business size, industry, risk exposure, family
circumstances, and growth ambitions.
What may work at the start-up stage might not be appropriate as your business expands.
With over 18 years of industry experience, Sterling Business Advisory provides tailored advice to help business owners make informed,
confident decisions. Whether you’re starting out or looking to restructure, we can help you choose the right path.
