Business structure

Ideally, you’d review it before you need to change it not after. Common triggers include: your income growing past a point where the current structure is costing you more tax than necessary, taking on a business partner, wanting to protect personal assets, planning to sell or exit the business, or bringing family members into the mix. If any of those sound familiar, it’s worth a conversation. We review business structures as a matter of course with clients because it’s one of the easiest levers to pull for meaningful tax savings.

Your business structure affects almost everything, how much tax you pay, what you’re personally liable for if things go sideways, how you can bring in partners or investors, and how much it costs you to run the business day-to-day. Choosing the wrong structure at the start can be expensive to fix later, and sticking with the wrong one as you grow can cost you significantly in tax. It’s one of those decisions that deserves proper advice before you commit, not a Google rabbit hole at midnight.

Yes, but it’s not always simple. Restructuring mid-stream can trigger capital gains tax, stamp duty, and other costs depending on what assets are involved and how the change is made. The earlier you get the structure right, the less expensive the fix. That said, if your current structure isn’t working for you, staying put just to avoid complexity isn’t the answer either. We can model the options and help you understand what a change would actually cost versus what you’d save over time.

Honestly, there’s no universal answer, which is exactly the point. The right structure depends on your income, your personal risk profile, whether you have or plan to have partners, your asset protection needs, your plans for growth, and your long-term exit strategy. What works perfectly for one business can be the wrong call for another. That’s why we don’t give generic advice on this one, we sit down, look at the whole picture, and give you a recommendation that actually fits your situation.

It should be ongoing, not a set-and-forget decision. Your structure should evolve as your business does. Many clients come to us as sole traders and move to a company structure as revenue grows. Others add a trust layer when they need income splitting or asset protection. We factor structure into our regular reviews with clients because what’s optimal at year one often isn’t optimal at year five.

The four main options are sole trader, partnership, company, and trust. Each has its own tax treatment, legal implications, setup costs, and ongoing compliance requirements. There’s also the SMSF (Self Managed Super Fund) structure for managing superannuation, which has its own set of rules. Choosing between them isn’t just about tax, it’s about the whole picture of how you want to run and protect your business. Our business structure reviews walk you through exactly which one, or combination, makes sense for your situation.

As a sole trader, you and the business are the same legal entity. Simple, cheap to set up, and easy to run, but every debt and liability is yours personally. A company is a separate legal entity, which means your personal assets have more protection if things go wrong. Companies also pay a flat tax rate (currently 25% for SMEs), which can be significantly lower than the marginal tax rate a sole trader pays on higher incomes. The trade-off is more compliance, more cost, and more paperwork. Whether the switch is worth it depends on where your income sits and what you’re trying to protect.

A trust holds assets on behalf of beneficiaries, which can be family members, companies, or others. The main appeal is flexibility: a discretionary (family) trust allows income to be distributed to beneficiaries in a tax-effective way each year, rather than all of it being taxed at one person’s marginal rate. Trusts can also provide asset protection and are a useful tool in succession planning. The downside is complexity, trusts require more setup, ongoing administration, and expert management. They’re absolutely worth it for the right business, but they’re not for everyone. We’ll tell you honestly whether a trust makes sense for your situation.

A partnership is essentially two or more people running a business together, sharing income, expenses, and, importantly, liability. It’s relatively simple and inexpensive to set up, similar to a sole trader. The key thing people miss is that in a standard partnership, each partner is personally liable for the debts of the business, including debts created by the other partner. A written partnership agreement isn’t legally required, but it’s essential. Without one, disputes about profit splits, decision-making, and what happens if someone wants to leave can get messy fast.

A Self Managed Super Fund is a way of managing your own superannuation rather than leaving it with a retail or industry fund. It can be used to invest in a range of assets including property and shares, and in some cases, business real property. The structure requires a trustee (an individual or company) to manage the fund and meet strict compliance requirements. Given the long-term and regulatory nature of SMSFs, getting the structure right from the start, and having proper management in place is critical. We work alongside financial advisors who specialise in this area to make sure clients are set up correctly and compliantly.

You’ll either overpay tax, expose yourself to personal liability you didn’t need to take on, or both. The cost of restructuring later including potential CGT, stamp duty, and professional fees can far exceed what you’d have spent getting it right upfront. We’ve seen it plenty of times: a business that ran as a sole trader for years when a company structure would have saved tens of thousands in tax. The good news is it’s fixable. The better news is it’s avoidable.