Setting up a legal business

Coronavirus (COVID-19): Restructuring your business

Small business owners who restructure by transferring assets from a sole trader, partnership or discretionary trust into a company structure may be eligible for a duty exemption on the transfer.

There are a number of ways you can legally structure your business, and each has its own registration requirements.

Sole trader

A sole trader is 1 individual who runs a business without partners or a company structure. This is the easiest and most inexpensive business structure. A sole trader has full control of the business, including ownership of all profits and responsibility for all debts. You can hire staff to support your business operations.

You may need:

  • Australian Business Number (ABN)
  • business name registration
  • trade mark registration.

Read about sole trader business structures.

Partnership

A partnership is a common and relatively simple, informal and inexpensive way to set up or structure a business. It involves 2 or more co-owners participating together in a business. A partnership also requires an intention to make and share profits and an understanding that these co-owners act on behalf of each other in business.

The Partnership Act 1891 sets out various rules for partnerships. This act places joint liability on all partners for the business's debts and obligations incurred during their involvement in the partnership (other than in an incorporated limited partnership). Partners are obligated to keep their co-owners properly informed. To ensure that all partners have a clear understanding of their rights, responsibilities and obligations, a written partnership agreement is vital.

To establish a partnership, you may need:

  • Australian Business Number (ABN)
  • business name registration
  • trade mark registration
  • limited partnership formation (only if you have a silent partner)
  • to register for GST if turnover is $75,000 or more.

Read about partnership business structures.

Company

A company must be registered under the Australian Corporations Law. Companies are expensive and complicated to set up. One of the biggest advantages of the company structure is that the liabilities of the company's shareholders may be limited to their share capital. This means shareholders' personal assets cannot usually be seized to pay company debts. As separate legal entities, companies rather than owners are liable for debts. However, establishing a company structure does include higher initial costs and ongoing fees. In addition, company losses cannot be offset against shareholders' other income.

To establish a company you may need:

  • registration of an Australian company
  • Australian Business Number (ABN)
  • business name registration
  • trade mark registration
  • register for GST if you turnover more than $75,000
  • comply with all obligations under the Corporations Act 2001 (Cwlth).

When trading as a company you will need to:

  • update the Australian Securities and Investments Commission (ASIC) within 28 days of changes to company details
  • keep valid and accurate financial records
  • understand and company with your obligations as a director.

Read about company business structures.

Trust

A trust is a legal relationship where a trustee (an individual or a company) carries on business for the benefit of other people (the beneficiaries).

Trusts can be expensive and complicated to set up – usually to protect the business assets for the beneficiaries. It is recommended you seek professional advice to support you through the process.

To establish a trust, you may need:

  • Australian Business Number (ABN)
  • a trade mark registration.

Read about trust business structures.

Business structure requirements

Australian Business Number

Australian Business Numbers (ABN) are managed by the Australian Taxation Office. There is no cost for an ABN. Applications can take up to 4 weeks to process.

Business name registration or change

Business name registrations are managed by the ASIC and cost $37 for 1 year, or $88 for 3 years. Apply online on the ASIC website or try the new Business Registration Service to apply for key business and tax registrations. You need an Australian Business Number (ABN) to register a business name. You also need to notify ASIC if you change certain details on an existing business name registration. Phone ASIC on 1300 300 630 for more information.

Registration of an Australian company

To register your Australian company, contact the Australian Securities and Investments Commission (ASIC) or try the new Business Registration Service to apply for key business and tax registrations. Registration costs will vary depending on your business type. Before you register, you need to know how many directors your company will have.

Limited partnership formation

To form and register a limited liability partnership or an incorporated limited partnership (ILP), visit the Queensland Government limited partnership forms and fees page. Applications costs will vary and it may take up to 1 week to process your application. A limited partnership formation is only required if you have a silent partner.

Trade mark registration

Trade mark registration is managed by IP Australia. Applications can take 7 or more months to process and application costs vary depending on the type of trade mark registration you need. A trademark protects your business name and/or logo from use by others. You need to review your trade mark registration after 10 years.

Registering for GST

If you're not registered for GST, you will need to check your turnover against the threshold each month. You need to register within 21 days of your GST turnover exceeding the relevant threshold.

You must register for GST if:

  • your gross annual business turnover is $75,000 or more ($150,000 or more for a non-profit organisation)
  • you provide taxi or limousine services - regardless of your gross annual turnover.

Learn more about GST, including how to register.

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