Tax basics for small business

Choosing a business structure

When starting a business, it is very important to choose the business structure that best suits your needs.

There are four main business structures commonly used by small businesses in Australia:

• sole trader
• partnership
• trust
• company.

We can't advise which structure you should choose, but we can show you how different structures will affect the way we tax your business income.

The structure you choose may affect:

• the tax you are liable to pay
• asset protection
• ongoing costs
• your clients - for example, some prefer to deal only with companies.

Whichever structure you choose, make sure you understand the responsibilities that go with that structure. Typically, costs and complexity increase as you move from a sole trader to a partnership to a company or trust.

You are not locked into any structure and you can change the structure as your business changes or grows.

The following information shows the main features of different business structures. It may help you decide which structure is best for your business.

For more information about business structures and responsibilities, contact the: Office of Fair Trading in your state Australian Securities & Investments Commission (ASIC) if you operate your business as a company. If you are not sure which structure to choose, talk to an accountant, tax adviser, solicitor or other business adviser.

Sections within Choosing a business structure

• Features of different business structures