How to Choose the Right Legal Structure for Your Company

Choosing an appropriate legal structure for your company is an essential step in setting up your business. The structure you select will have a significant impact on various aspects of your business, such as taxes, liability and management. This article will detail some legal structures to consider and highlight the importance of consulting with business lawyers in Sydney to ensure you make the most logical choice.

Sole Proprietorship

A sole proprietorship is arguably the simplest legal structure for a business. It refers to a company that’s owned and operated by a single individual. This structure is easy to establish and requires minimal paperwork. In most cases, an Australian sole trader will simply need to register for an ABN and GST to get started. However, a sole proprietor is personally liable for all debts and obligations of the business, which means their personal assets could be at risk in the event of any legal or financial issues that arise during the course of running the business.


A partnership is a business arrangement where two or more individuals share ownership and management responsibilities. Partnerships can be general or limited, with the main difference being the extent of each partner’s liability and stake in the business. In a general partnership, all partners share equal liability, while limited partners have limited liability based on their investment in the company. It’s essential to have a partnership agreement in place that outlines the responsibilities, profit-sharing and dispute resolution procedures so business partners can conduct their business with as minimal friction as possible.


A corporation is a separate legal entity from its owners, known as shareholders. This structure provides limited liability protection for its owners, meaning their personal assets aren’t at risk. However, corporations are subject to more stringent regulations and additional taxes compared to other legal and business structures. The process of forming a corporation is more complex and typically requires the assistance of business lawyers in Sydney to remain compliant with relevant tax, employee and financial laws.

Limited Liability Company (LLC)

A limited liability company (LLC) is a hybrid legal structure that combines elements of both corporations and partnerships. LLCs offer limited liability protection to their owners, known as members, and can have a flexible management structure. An LLC can choose to be taxed as a partnership or a corporation, providing potential tax advantages. It’s important to create an operating agreement for an LLC, outlining the members’ rights, responsibilities and profit-sharing arrangements in case of any contract breaches or if a partner wishes to exit the company.


A trust is a legal structure where a trustee holds and manages assets for the benefit of others, known as beneficiaries. Trusts can be used for various purposes, including asset protection and tax planning. There are different types of trusts, such as discretionary trusts, unit trusts and hybrid trusts, each with its own set of rules and advantages. Establishing a trust can be a complex process and usually requires the guidance of business lawyers in Sydney for the best results.

Seeking Professional Advice

Selecting the right legal structure for your company is a critical decision that can have both positive and negative consequences on the future of your business. It’s essential to consider your business or entity in a holistic manner in order to choose the structure that not only makes the most sense for your company type, but will also give your company as many advantages as possible. Consulting with experienced business lawyers in Sydney can help you navigate the complexities of choosing the most suitable legal structure for your company as well as ensuring compliance with relevant regulations and providing you with the necessary guidance for long-term success.