Choosing the correct business structure is not just about how your company operates; it has a significant impact on how you’re taxed and your legal liability. Whether you’re a sole trader, a partnership, or a corporation, the structure of your business will affect how much tax you pay and the deductions you’re entitled to claim. This guide helps Melbourne-based business owners understand how to select the most tax-efficient structure for their business.
Operating as a sole trader is often the simplest option for small business owners. You’re taxed as an individual, meaning you can claim deductions for business expenses directly on your personal tax return. However, this structure doesn’t offer protection from personal liability, which can be a risk if your business faces financial difficulties.
In a partnership, two or more people share the profits, losses, and responsibilities of running the business. Each partner is taxed individually on their share of the business income. While this structure offers more flexibility than a sole trader setup, it also means that personal assets could be at risk if the business incurs debts.
Setting up your business as a corporation provides significant tax advantages, especially as your business grows. Corporations are taxed separately from their owners, which can result in lower tax rates. Additionally, corporations offer liability protection, shielding your personal assets from business risks. Our business advisory services help you decide which structure is best suited for your long-term financial goals.
