Cost-effective and easy to set up

Full control over the business’s management and decision-making

You hold all of the business’s profits and assets

Your business is governed by fewer regulations

Business profits do not need to be disclosed to the public

Limited reporting requirements compared to other business structures

This business structure is easy to disband or sell

You can file a tax return using your own personal tax file number (TFN)

There is no requirement to open a separate bank account for your business. However, it’s a good idea to keep track of your business expenses and income

Inflexible business structure

Unlimited liability, profits or losses made by the business cannot be split with family members.

Personal assets are at risk if there’s a problem

Your personal assets can be used to pay business debts since there’s no distinction between business and personal assets

Capital is difficult to raise in this business structure because your business can’t raise capital simply by issuing shares as a company could. Essentially, the only capital you can raise is either through debt that you can raise from friends or family or through a business loan that you can apply for from your bank

A lack of business partners

The business structure is rigid therefore it will not accommodate an expanding business

There are no tax benefits

Partnerships are governed by a partnership agreement that is easy to administer

Several people’s expertise and resources are combined

Does not need to disclose any profits to the public

Cheap registration and it’s easy to set up

Capital raising is easy

This business structure is easy to disband or sell

Reporting requirements are minimal

This business structure obtains benefits from taxation.

Personal liability means that you’re responsible for all of the debts and taxes of your business. Since there is no distinction between business and personal assets, your personal assets can be used to pay business debts

Shared responsibility for the actions and mistakes of other partners

You’ll be taking joint responsibility for the business’s debts

It’s difficult to change business structures

Each year, partnership tax returns must be filed with the Australian Taxation Office (ATO)

Partners are required to take responsibility for their own superannuation arrangements

If your turnover is $75,000 or more annually, you must register for GST

Separate tax file numbers (TFNs) must be provided

Your business must have an Australian Business Number (ABN) to use for all business transactions

Companies are separate legal entities. A separate legal entity means a company exists separately from everyone involved or associated with it, including its owners and employees. Essentially, this works to protect you and your finances in the event of legal action taken against your company. Companies have their own assets, obligations and rights

Shareholders are not liable for the company’s debts

Companies can enter into contracts as themselves

A company can trade anywhere in Australia and has a lower tax rate than the highest tax bracket for individuals

This business structure is ideal for businesses looking to expand and scale

The company has its own legal personality. As a result, generally, shareholder obligations are limited to the unpaid amount on their shares (which is usually zero)

Most suited for businesses with high risks

Shareholders and members of a company are generally not personally liable for company debts given their limited liability

For startup businesses, a company structure is desired due to its ability to raise capital easily and grow through the issuance of shares

Companies are sold or dissolved easily

Companies enjoy advantages from tax

It has wider access to capital

Setting up a company is difficult and expensive

Companies require a lot of administrative work compared to other business structures

Government Registration fees are high

It’s difficult to change business structures

Ongoing costs and set-up costs are higher for this type of business structure

The Australian Taxation Office (ATO) requires the annual filing of a company tax return

An annual review must be completed and a fee must be paid

A declaration of solvency is required of company directors annually

A Director Identification Number is required of all company directors

Tax and legal obligations must be met by companies

Your company must register for GST if it turns over $75,000 or more annually Non-profit organisations must register for GST if their turnover is $150,000 annually

ASIC must be updated within 28 days of any significant changes to company information

Financial records must be kept

As a director, you are responsible for knowing and complying with all your obligations outlined in the Corporations Act 2001

Limited liability means due to the company having its own legal entity member or shareholder liability is limited, and they’re generally not personally liable for the company’s debts

Raising capital is easy. Whenever a company asks its investors for additional funds, this is called capital raising

Tax benefits. The primary tax advantage of this legal structure is that trustees can distribute income, such as capital gains, from investments and business activities to beneficiaries in lower tax brackets (typically children or spouses)

Asset protection. Assets are anything a company or individual owns that has economic value and is redeemable with cash is considered an asset

Expensive registration compared to other business structures

Hard to set up

Changing or dissolving from this business structure once established can be difficult

Formal trust deeds describing the trust’s operation are required for this type of business structure

Trustees are required to perform formal administrative duties on a yearly basis

This legal structure is complicated

Its operations are legally the responsibility of the Trustee