How to Choose the Right Business Structure in Australia: Sole Trader vs Company vs Trust
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Choosing a business structure is a big deal—it shapes everything from your tax bill to how much paperwork you’ll do and how protected your personal assets are. If you’re starting a business in NSW, you might be wondering: Should I go solo as a sole trader, set up a company, or think about a trust? Let’s break it down in plain English so you can make a confident choice.
Why Your Structure Matters
Think of your business structure as the foundation of your house. Get it right, and everything else is easier—taxes, legal protection, even bringing in partners or investors down the track. Get it wrong, and you might end up with more risk, higher costs, or missed opportunities3.
The Main Options at a Glance
Structure | Best For | Key Benefit |
Sole Trader | Freelancers, solo operators | Simple & low-cost setup |
Company | Startups, growing businesses | Limited liability & tax options |
Trust | Family businesses, asset protection | Tax planning & protection |
Sole Trader: Keep It Simple
If you’re just getting started or want to keep things straightforward, being a sole trader is often the easiest path.
Why people love it:
- It’s cheap and quick to set up.
- You’re the boss—full control over decisions.
- Less paperwork and fewer compliance headaches.
But watch out for:
- You’re personally responsible for any business debts or legal issues.
- Raising funds can be tough.
- Fewer ways to minimise your tax bill.
Tax basics: All your business income is taxed at your personal rate, but you might get the Small Business Tax Offset.
Example: Lisa, a freelance designer in Penrith, chose the sole trader route for her first year—simple, affordable, and no fuss.
Company: Professional & Protected
Setting up a company means your business is its own legal entity. This is great if you’re planning to grow, want to attract investors, or need to protect your personal assets.
Why people love it:
- Your personal assets are generally protected if things go wrong.
- You’ll pay a flat corporate tax rate (25% for many small companies).
- Easier to scale, bring in partners, or get investment.
But watch out for:
- More expensive to set up and run.
- Extra admin: ASIC registration, annual financials, director duties.
- You’ll need to stay on top of compliance.
Tax basics: Companies pay tax separately from you. You can keep profits in the company and pay yourself a salary or dividends.
Example: Mark launched a tech startup in Western Sydney and set up a company—he wanted to impress investors and keep his personal assets safe.
Trust: For Families & Flexibility
A trust is a bit more complex, but it can be great for family businesses, asset protection, or if you want to split income between family members.
Why people love it:
- Protects assets (especially with a corporate trustee).
- Lets you distribute income to beneficiaries (often family members).
- Can offer tax advantages through income splitting.
But watch out for:
- More expensive and complex to set up and run.
- More paperwork and compliance.
- Less flexibility to reinvest profits back into the business.
Tax basics: Income is usually taxed in the hands of the beneficiaries, not the trust itself (unless you don’t distribute it properly).
Example: The Singh family set up a discretionary trust for their café chain, letting them share profits among family members.
Side-by-Side Comparison
Factor | Sole Trader | Company | Trust (with corporate trustee) |
Legal Entity | Not separate | Separate | Separate |
Liability | Unlimited | Limited | Limited |
Setup Cost | Low | Medium | High |
Admin & Reporting | Minimal | High | Moderate to High |
Tax Flexibility | Low | Medium to High | High |
Best For | Freelancers, side hustles | Startups, growth-stage | Families, tax planning |
How Do You Decide?
Ask yourself:
- How much do I expect to earn?
- Am I going solo or working with others?
- Do I need to protect my personal assets?
- What are my long-term business goals?
- How much can I spend on setup and ongoing admin3?
If you’re unsure, that’s completely normal. Many business owners get advice before making a decision—because the right structure can save you money, time, and stress down the track3.
Need a Hand?
At AAA Tax Agent & Accounting Services, we help you figure out the best structure for your goals. We’ll walk you through:
- Choosing the right setup
- Registering your business and ABN
- Understanding your tax and compliance obligations
- Staying on the ATO and ASIC’s good side
Ready to get started? Visit us at 7 Tussock Street, Ropes Crossing, or book a free consultation. Let’s set your business up for success—right from day one.
