Almost every new business asks the same first question, usually before they've asked anything else: "what structure should I use?" There's no single right answer — but there is a right way to think about it, and it comes down to four things: liability, tax, cost, and how much admin you're willing to carry.
The three options, in plain English
- Sole trader — you and the business are legally the same thing. Simplest and cheapest to set up, but your personal assets aren't protected if the business runs into debt or legal trouble.
- Partnership — two or more people running the business together, sharing income and liability. Similar simplicity to a sole trader, with the added complexity of a second (or third) person's decisions affecting you.
- Company — a separate legal entity in its own right. More protection for you personally, but more ongoing obligations: an ASIC annual review, a company tax return, and generally more paperwork than the other two.
The questions that actually decide it
How much am I likely to earn? At lower income levels, a sole trader structure is often more tax-efficient, company tax rates and the extra compliance cost aren't always worth it until income reaches a certain point. There isn't a fixed number that works for everyone; it depends on your other income and circumstances.
Am I exposed to real liability risk? A business that could realistically be sued, think trades, consulting advice, anything client-facing with real stakes, leans harder toward a company structure for the personal asset protection. A low-risk side business leans the other way.
Am I doing this with someone else? If yes, a partnership agreement (or a company with agreed shareholder terms) matters more than the structure label itself, most partnership disputes come from what wasn't written down, not from the structure being wrong.
How much ongoing admin am I willing to take on? A company means an annual review, more formal record-keeping, and a separate tax return every year. If that sounds like more than you want to manage, or pay someone else to manage, that's a legitimate factor, not a lesser reason.
The mistake we see most often
Choosing a company structure early because it "sounds more professional," then paying for compliance a small, low-risk business didn't need yet. Structure should follow the business's actual risk and income, not how it looks on a business card. The reverse mistake also happens, staying a sole trader well past the point where liability exposure has grown, because switching feels like a hassle. Neither extreme is right by default.
Can I change structure later?
Yes, and plenty of businesses do, starting as a sole trader and moving to a company once income or risk grows. It's a genuine restructure, though, with its own paperwork and sometimes tax consequences, so it's worth a proper conversation rather than assuming it's a simple swap.
Quick self-check
- Expected income in year one: low and steady, or high and variable?
- Personal liability risk: minimal, or genuinely exposed?
- Working with someone else: yes or no?
- Appetite for ongoing compliance: happy to manage it, or want it kept simple?
There's no scoring system that spits out an answer, but if you can answer those four honestly, most of the decision is already made.
This is general information, not personal advice for your situation, the right structure depends on specifics a written article can't account for. See our Start a Business pagefor how we handle the registration itself once you've decided, or [Book a Consultation] and we'll work through it together before anything's registered.