Advantages and disadvantages of each business structures


Being in business, it is very important to choose the correct business structure. There are 4 main types of business structures commonly used by small business. Here are the brief outlines of advantages and disadvantages each business structures.

There are many things that must be considered when deciding what is the best tax and investment structure. Reducing tax is one of priority but you also need to consider other factors such as asset protection and flexibilities.

If your current business structure has outgrown your requirements, you will need to consider upgrading to more suitable business structure.

Sole Trader business structure – is an individual who is trading on their own

Advantages

  • Full control
  • Low cost and easy to set up

Disadvantages

  • Personally fully liable
  • High income earners will pay top marginal rate

Partnership business structure – For tax purpose, association of persons or entities that carry on business as partners or receive income jointly

Advantages

  • Full control
  • Low cost and easy to set up

Disadvantages

  • Partnership dissolves when one of partners exits or dies
  • Partners fully liable

Trust business structure – is an obligation on a person to hold property for the benefit of others

Advantages

  • Continuity
  • Protect assets for beneficiaries
  • Distribute trust income to beneficiaries
  • Tax effective

Disadvantages

  • Complexity
  • High cost setting up

Company business structure – a legal entity separate from its shareholders

Advantages

  • Limited liability
  • Company tax rate is 30%

Disadvantages

  • High cost setting up and ongoing compliances
  • Annual fees to ASIC

Disclaimer

Every effort has been made to offer the most current, correct and clearly expressed information possible within this site. Nonetheless, inadvertent errors can occur and applicable laws, rules and regulations may change.

These materials on this website are general in nature. It is made available on the understanding that the JH Business Services & Taxation is not thereby engaged in rendering professional advice. Before relying on the material in any important matter, users should carefully evaluate its accuracy, currency, completeness and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.

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JH Business Services & Taxation
Accounting | Business Advisory | Tax Services
Specialist in small to medium business 
& personal tax services


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