A sole trader running a business from a small office

You’ve got the idea, the drive, and the location - maybe you’re setting up shop near the Maroochydore CBD or bringing a new service to Noosa Heads. Starting a business or purchasing an existing company on the Sunshine Coast or anywhere across Queensland is the beginning of a dream. It’s exciting, nerve-wracking, and full of potential. But before you sign a lease or register your ABN, there is one foundational decision that you have to address: how is your business structured?

Your business structure is the legal framework that determines how much tax you pay, who makes the decisions, and how easily you can grow or sell your venture. It also either protects your family’s home and savings or leaves them dangerously exposed. Simply put, it can be the difference between a secure future and a costly, complicated mess down the line.

Getting your legal structures in place for your business from day one is essential. As passionate, local lawyers, we’ll help you cut through the legalese and choose the correct structure for your goals, ensuring your business is built on solid, protected ground.

What Is a Legal Structure in Business?

Your business structure defines how your entity operates. It dictates the relationship between the business and its owners, how financial transactions are managed, and what legal protections (or liabilities) are in place.

If you want to run a business in Queensland, the fundamental Australian structures are governed by federal law (like the Corporations Act 2001). However, your chosen structure will interact with state and local government licensing and regulations.

To determine the most appropriate choice for you, you can focus on four key factors:

Liability & Risk: To what extent are your personal assets (your home, savings) protected from business debt?
Taxation: How is profit taxed? Do you pay tax personally, or does the entity pay tax?
Management & Control: How easy is it to run the business and maintain decision-making control?
Costs & Compliance: What are the setup costs and ongoing administrative obligations?

Decoding the Primary Business Structures

In Australia, the most common structures are the Sole Trader, Partnership, Company, and Trust. Let’s explore these business structures in detail.

1. The Sole Trader

The simplest and most common structure for individuals starting a business.

Definition: An individual operating the business under their own name.
Best Suited For: Individuals who want complete control over their operations. It’s often the chosen structure for small businesses on the Sunshine Coast, especially consultants, freelancers, or single-operator tradies.
Liability: This is the critical point. Legally, the Sole Trader and the business are the same entity. If the business incurs debt or is sued, your personal assets are at risk.
Taxation: Income tax is paid at your individual marginal tax rate. All profits are considered your personal income.
Advantages: It is the easiest and most affordable to set up, with minimal reporting requirements, and allows you to offset business losses against other personal income.

2. The Partnership

An ideal structure when two or more people join forces to run a business together.

Definition: Two or more individuals or entities who divide the business’s profits and losses.
Best Suited For: Professionals or friends combining resources and expertise, often seen in Queensland among smaller accounting or medical practices.
Liability: Like a sole trader, your personal assets are at risk. Furthermore, you can be held personally liable for debts incurred by the actions of your partners. A robust Partnership Agreement, drafted by a commercial lawyer, is essential for governing expectations and managing risk.
Taxation: The partnership itself doesn’t pay tax. It lodges a partnership tax return, and the profits are distributed to the partners who then pay tax at their personal marginal rates.
Advantages: This business structure is relatively easy to set up and administer, and allows partners to pool capital and expertise.

3. The Company

The most popular choice for high-growth businesses seeking robust asset protection.

Definition: A separate legal entity (a ‘legal person’) capable of incurring debt, holding assets, and entering into contracts in its own name. It is owned by shareholders and managed by directors.
Best Suited For: Businesses seeking rapid expansion, requiring significant capital, or operating in high-risk industries.
Liability: Since the company is a separate entity, the liability for business debts is borne by the company, protecting the personal assets of the directors and shareholders (exceptions apply, particularly when personal guarantees are given). This is why, when you acquire a business in this structure, the process requires detailed due diligence.
Taxation: Companies pay a flat corporate tax rate (currently 25% for eligible small businesses or 30% for others). This is a major advantage for reinvesting profits, as the money is only taxed at the corporate rate. However, when profits are paid out to shareholders as franked dividends, the tax already paid by the company is credited to the shareholder, ensuring the total tax paid is ultimately based on the individual’s marginal tax rate.
Disadvantages: High setup and ongoing compliance costs. It also comes with strict reporting obligations with the Australian Securities and Investments Commission (ASIC). This is where having a dedicated business structure lawyer can pay off.

4. The Trust

A sophisticated structure used primarily for asset protection and tax flexibility.

Definition: A structure where a Trustee (an individual or a Company) holds assets or conducts business for the benefit of others (the Beneficiaries). It is established through a legal document called a Trust Deed.
Best Suited For: Family businesses or property investment vehicles, where the owners require flexibility in distributing income to beneficiaries for tax planning purposes.
Liability: If a Corporate Trustee (a company) is appointed to run the Trust, it can offer limited liability protection. However, the complexity of the structure itself must be managed carefully.
Taxation: Trusts are incredibly flexible. Income is generally passed through to the beneficiaries, who pay tax on it at their personal marginal rates, potentially resulting in lower overall tax.
Disadvantages: Most expensive and complex to establish and maintain. The Trustee’s powers are rigidly defined by the Trust Deed, making careful drafting a necessity.

Choosing the Appropriate Structure and Business Structure Management

Deciding which of these legal business structures is right for you requires looking ahead.

While the Sole Trader is simple, it offers zero asset protection. A Partnership is collaborative but exposes you to your partners’ liabilities. A Company or a Trust offers stronger asset protection but comes with more complex business structure management and financial oversight. Regardless of your structure, there are always ongoing legal aspects of running a small business that require attention.

As your business lawyer on the Sunshine Coast, Bradley & Bray often advises clients to consider:

Risk: Is your business inherently risky (e.g., construction, high manufacturing)? If so, a Company (with limited liability) should be strongly considered.
Growth Potential: Do you plan to scale, hire many employees, or attract outside investors? A Company structure is designed for this.
Family Income: Do you need flexibility in splitting income among family members for tax minimisation? A Discretionary Trust might be the answer.

It is possible to start small - perhaps as a Sole Trader - and then restructure later, but keep in mind that restructuring involves significant costs and capital gains tax implications. It is always best to start with the structure that suits your first three to five years of projected growth.

At Bradley & Bray, we are adept at guiding Queensland entrepreneurs through this essential decision, ensuring compliance with federal law and specific state requirements regarding trade names, licenses, and permits and working with your other trusted advisors such as accountants, to ensure your taxation and accounting matters are covered.

Consult with Our Legal Team Today

Don’t leave your personal wealth exposed to business risk.

Our team at Bradley & Bray is pleased to offer a wide range of personalised legal services. Specialising in commercial & business law on the Sunshine Coast and beyond, we are here to provide the wise and intentional legal counsel you need.

Contact us today to schedule a consultation.

Disclaimer: This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers take no responsibility for any use of the information provided in this article.