A 360 ONE guide for business owners weighing up sole trader, partnership, company and trust.
The structure you trade under shapes almost everything that follows. It sets how much tax you pay, who is responsible if something goes wrong, how easily you can bring in partners or investors, and how smoothly you can one day step back or sell. Get it right early and every decision afterwards sits on solid ground. This is The 1% Way in its simplest form: a considered choice at the foundation that compounds into real advantages over the years that follow.
This guide walks through the 4 structures most Australian businesses use, what each one means in practice, and the questions that genuinely decide which is right for you.
The 4 most common structures
The Australian Taxation Office and the Federal Government resource business.gov.au both recognise four main business structures: sole trader, partnership, company and trust. Each carries a different balance of simplicity, cost, tax treatment and personal risk.
Sole trader
A sole trader is one individual trading in their own name. It is the simplest and most affordable structure to establish, which is why so many businesses begin here.
How it works in practice. You register an Australian Business Number, trade under your own tax file number, and report your business income through your personal tax return. Your business profit is taxed at your individual marginal rates. You are free to employ staff, and you pay your own superannuation rather than receiving it from an employer.
The basics. As a sole trader, you and the business are the same legal entity. That brings full control and minimal paperwork, and it also means you carry personal responsibility for the debts and obligations of the business. Your personal assets can be exposed if things go wrong.
Often suited to. Individuals starting out, testing an idea, or running a business where personal risk is low and structure costs are best kept lean.
Partnership
A partnership is two or more people or entities carrying on a business together with the intention of sharing profit.
How it works in practice. The partnership has its own ABN and tax file number and lodges its own tax return each year. The partnership itself pays no income tax. Instead, each partner reports their share of the profit in their own return and pays tax at their own marginal rates. Costs and responsibilities are shared according to your agreement.
The basics. In a general partnership, the partners are jointly and individually responsible for the debts of the business, including obligations created by the other partners. A clear, written partnership agreement covering profit shares, decision making, and what happens when a partner leaves is one of the most valuable documents a partnership can have.
Often suited to. Two or more people pooling skills or capital who want a straightforward way to share a business and are comfortable with shared responsibility.
Company
A company is a separate legal entity, registered with the Australian Securities and Investments Commission. It can do business, own assets and incur obligations in its own right.
How it works in practice. The company has its own ACN, tax file number and ABN, and lodges its own company tax return. Company profits are taxed at the company tax rate. For the 2025-26 year, a base rate entity pays 25 per cent, while other companies pay 30 per cent, with eligibility resting on aggregated turnover and the proportion of passive income. [Partner review: confirm the current company tax rates and base rate entity thresholds at the time of publishing.] Profits paid to shareholders as dividends carry franking credits for the tax the company has already paid.
The basics. Because the company is a separate entity, the personal liability of directors and shareholders is generally limited to their investment, which is a meaningful layer of protection. In return, a company carries more obligations: directors have duties under the Corporations Act, an annual ASIC review and fee apply, record keeping is more involved, and every director now needs a Director Identification Number.
Often suited to. Businesses that are growing, carry commercial risk, want to retain profits for reinvestment, or plan to bring in investors or eventually sell.
Trust
A trust is an arrangement where a trustee holds and manages business assets for the benefit of others, known as the beneficiaries. The discretionary trust, often called a family trust, is the most common form for family businesses.
How it works in practice. A trustee, which is frequently a company set up for the role, operates the business under a trust deed. The trust lodges its own return, and income distributed to beneficiaries is taxed in their hands at their own marginal rates. A discretionary trust gives the trustee flexibility over how income is distributed each year within the terms of the deed.
The basics. Trusts can offer strong asset protection and genuine flexibility in how income is shared across a family group, which is why they suit many established businesses and wealth structures. They also carry the most complexity and cost. The deed must be followed precisely, income that is not distributed can be taxed at the top marginal rate, and loans between the trust and related parties need careful handling. This is a structure best established and run with professional guidance.
Often suited to. Family businesses, groups holding investments or assets, and owners focused on asset protection and planning across generations.
Business structure options
| Structure | Set up cost and effort | Personal liability | How profit is taxed | Suits |
|---|---|---|---|---|
| Sole trader | Low | Full personal responsibility | At your marginal rates | Starting out, low risk |
| Partnership | Low to moderate | Shared, individual and joint | Each partner at their own rates | Two or more owners sharing a business |
| Company | Moderate to high | Generally limited | Company tax rate | Growth, risk, reinvestment, investors |
| Trust | High | Strong protection through the structure | Beneficiaries at their own rates | Family groups, asset protection, succession |
The questions that actually decide it
Choosing well comes down to weighing a handful of questions honestly.
- How much personal risk does the business carry? The greater the commercial risk, the more valuable the protection of a company or trust becomes.
- How do you want profits taxed and shared? Companies offer a flat rate and the ability to retain earnings. Trusts offer flexibility across a family group. Sole trader and partnership income flows straight to the individuals at their own rates.
- What cost and complexity are you ready to carry? Every layer of protection and flexibility adds paperwork and expense. The right structure is the one whose benefits justify its upkeep for your situation.
- Where is the business heading? Bringing in investors, scaling a team, or planning a future sale all point towards a structure built for growth.
- Who needs to be looked after, now and later? Family involvement, succession, and protecting what you build over time all influence the answer, particularly where a trust is concerned.
Changing Structure as you Grow
The structure that fits a business in its first year is often not the one that fits it in its fifth. Moving from sole trader to company, or restructuring into a trust, is a well trodden path as a business matures.
These changes carry tax consequences worth planning for, including capital gains tax and, in some cases, state stamp duty. The small business restructure rollover can allow eligible businesses to change structure while deferring some of these tax outcomes, provided the conditions are met. [Partner review: confirm current small business restructure rollover eligibility before relying on this in client work.] The key is to plan the move in advance so the timing and the mechanics work in your favour.
What Strong Business Setups Have in Common
Across the businesses that get this right, a few habits stand out. They choose a structure that matches their actual level of risk rather than the cheapest option by default. They put agreements and deeds in writing and keep them current. They keep business and personal finances clearly separate. And they review the structure as the business grows, so it continues to serve them rather than hold them back.
How 360 ONE Partners With Tou
The right structure is rarely obvious from the inside, because it sits at the intersection of tax, risk, family and ambition. We partner with you to understand your full picture, then recommend and establish the structure that suits where your business is now and where it is heading. As your business grows, we review that structure with you and guide any transition with the tax and timing planned in advance.
This is the 360° view in action: your business, your tax position and your future considered as one connected picture, with the foundations set right from day one.
Sources. Australian Taxation Office, business.gov.au, and the Australian Securities and Investments Commission, for guidance on business structures, registration and company obligations. Figures stated are current as at the 2025-26 financial year.
This guide is general information and does not take account of your personal circumstances. Speak with 360 ONE before acting on it.