The structure you choose for your business should fit comfortably, like a good pair of shoes. A poor choice of business structure can prove painful. The most common business structures are sole trader, partnership, proprietary limited company, association and co-operative. Each has advantages, and disadvantages.

In deciding what structure to choose, you should consider such factors as taxation, type and size of business, finance requirements and establishment costs. Your final decision should only be made after talking to your accountant or solicitor.

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This is the simplest and most inexpensive form of business structure to set up. As a sole trader you can trade under your own name. However, if you wish to have other words in the title of the business then you must register a business name. Registration of a business name does not make the sole trader a separate legal entity. You will still be responsible for any actions of the business and personally liable for all business debts.

The most commonly-used business name registration forms are available on-line through the Business Licence Information Service (BLIS).

For information on registering a business name as a sole trader, contact the Office of Fair Trading on 13 32 20.

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A partnership is defined by the Partnership Act 1892 (NSW) as the relationship which exists between persons carrying on a business in common with a view to profit. It involves an agreement between two or more parties to enter into a legally binding relationship and is essentially contractual in nature.

It's wise to have a formal written partnership because it sets out each partner's responsibilities and reduces the likelihood of disputes. For example, one partner may be contributing more money or time to the business and therefore be entitled to a greater share in the business. An agreement can also cover what happens if the structure is dissolved or changed, for example, through the retirement or death of one of the partners.

Incorporated Limited Partnerships

The NSW Partnership Legislation also provides for a special type of partnership, the Incorporated Limited Partnership (ILP), to be registered for four types of limited partnerships which can be established under Commonwealth legislation for venture capital investment purposes:

• Venture Capital Limited Partnerships (VCLP)
• Early Stage Venture Capital Limited Partnerships (ESVCLP)
• Australian Venture Capital Fund of Funds (AVCFOF)
• Venture Capital Management Partnerships (VCMP).

View the Incorporated limited partnerships page for further  information on registering as a partnership or incorporated limited partnership (ILP) or contact the Office of Fair Trading on 13 32 20.

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A private company is a more complex business structure formed by one or more people who wish to have a business that is a separate legal entity to themselves. When you form a company, you could become an employee, director and/or shareholder of the company.

Private companies are regulated under the Corporations Law which sets out substantial obligations for company directors. Establishment and ongoing administrative costs associated with Corporations Law compliance can be high. This is why the structure is generally considered to be better suited to medium to large businesses.

The Australian Securities and Investments Commission offer a number of resources to help you form a company. The Commission has two Service Centres in NSW located at:

Level 8 City Centre Tower
55 Market Street
Sydney NSW 2000
Tel. (02) 9911 2500

and

Ground Floor T&G Building
45 Hunter Street
Newcastle NSW 2300
Tel. (02) 4929 4555

Website: http://www.asic.gov.au 

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An association is an alternative to forming a company for small non-profit groups. It has similar advantages as a company but is not as expensive to set up or legally maintain. An association can trade but this cannot be its main objective. Any profit from the trading should be put back into the association and not given to its members.

Associations tend to be small community groups but can include specialist interest groups such as sports associations, industry associations, animal breeder associations and hobby associations.

The most commonly-used forms for incorporated associations are available on-line through the Business Licence Information Service (BLIS). 

For more information visit the Associations section of this website.

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A co-operative is a form of business organisation which is member-owned. It must consist of five or more people. Co-operatives are distinctive for fostering a democratic style of work, pooling resources to be more competitive, and sharing skills. Co-operatives supply goods and services to their members or to the general public in areas as diverse as retailing, manufacturing, labour hire, printing and agriculture.

NSW has the largest and most significant co-operative sector in Australia with over 800 co-operatives generating millions of dollars in revenue a year.

For further information on co-operatives and how to set one up, contact the Registry of Co-operatives, Office of Fair Trading on (02) 6333 1400 or 1800 502 042.

For more information visit the Cooperatives section of this website.

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