Partnership

A partnership is a business structure that involves a number of people who carry on a business together. You may choose a partnership over a sole trader structure for example, if you’ll be jointly running the business with another person or a number of people (up to 20).

There are two types of partnerships – general and limited. Partnerships are governed by the Partnership Act 1958.

Key aspects of a partnership structure

• It’s relatively easy and inexpensive to set up.

• It requires a separate Tax File Number (TFN).

• If you are carrying on an enterprise, you can apply for an Australian Business Number (ABN), but this is not compulsory.

• It’s not a separate entity – like a sole trader, you and your business partners are personally liable for the debts of the business.

• You have shared control and management of the business with your partners.

• The partnerships doesn’t pay income tax on the income earned. You and each of your partners pay tax on the share of the net partnership income you each receive.

• Requires a partnership tax return to be lodged with the Australian Taxation Office (ATO) each year.

• Each partner is responsible for their own superannuation arrangements – you are not an employee of the partnership.

• You must be registered for GST if the annual income turnover is $75,000 or more

Company

A company is a type of business structure. You may consider a company structure when starting or growing your business. A company is a separate legal entity, unlike a sole trader or a partnership structure. This means the company has the same rights as a natural person and can incur debt, sue and be sued. The company’s owners (the shareholders) can limit their personal liability and are generally not liable for company debts.

A company is a littlebit complex business structure, with more set-up and administrative costs because of additional reporting requirements. Company needs to be registered  with the Australian Securities and Investments Commission (ASIC).

Key aspects of a company structure

• Is a separate legal entity.

• Has limited liability compared to other structures.

• Is a littlebit complex business structure to start and run.

• Involves higher set up and running costs than other structures.

• Requires understanding and comply with all obligations under the Corporations Act 2001.

• Means that business operations are controlled by directors and owned by the shareholders.

• Must be registered for goods and services tax (GST) if the annual GST turnover is $75,000 or more. The registration threshold for non-profit organisations is $150,000.

• Means the money the business earns belongs to the company.

• Requires an annual company tax return to be lodged with the ATO.

The Complexity of Company changes with type of Company like less complexity in Proprietory Companies to more complexity in Limited Companies and Listed Companies

Trust

A trust is an obligation imposed on a person – a trustee – to hold property or assets (such as business assets) for the benefit of others, known as beneficiaries.

Key aspects of a Trust

• can be expensive to set-up and operate.

• require a formal trust deed that outlines how the trust operates.

• require the trustee to undertake formal yearly administrative tasks.

• if you operate your business as a trust, the trustee is legally responsible for its operations. A trustee of a trust can be a company

• It provide some asset protection

• In few cases, with trust type of business structure, one can take benefit of tax arbitrage