True Local

Connect with an organisation that supports you & your local business community.

Local Businesses

Local Businesses

1 February 2015

What Business Type Do I Need?

For many people starting a business for the first time, it can be confusing knowing what business type is best for them.

This chart is intended to provide a quick guide. Each business type is evaluated to a criteria, in order for you to make a comparison.

The Adelaide Hills Business Centre can assist you to understand the different business types based on your particular situation and needs.  We also have some great business getting started pages.


Click here for details
Risk
Discretionary Trust
(Family Trust)
Company
(Pty Ltd, Ltd)
Individual
(Sole trader)
Partnership
Unit Trust
Exposure to
liability
Limited - Subject to
trust deed
Limited
Unlimited
Unlimited, as well
as joint and
several
Limited - Subject
to trust deed
Control over assets
Uncertain
Separated
Absolute
Joint
Collective
Accommodation of
general wealth
creation
High level of asset
protection
Company wealth at
risk and to a greater degree.

Personal assets are 
protected
Wealth at risk
Wealth at risk
Wealth at risk
Ability to obtain
finance
Reasonable
Good and most likely 
with directors guarantee
Good with owners security
Good with owners security
Good
Disclosure of results
None
None unless shares 
are listed or Disclosure
requirements of the 
Corporations Act
None
None - Other
than between
partners
None - Other than
between unit
holders
Compliance costs
Medium
Medium for small Pty Ltd.
Higher if listed or large 
number of shareholders
Low
Low
Medium
Exposure to family
disharmony
Moderate
Low
Moderate to
high
Moderate to high
Moderate - Low
Employee v
proprietor
Employee
Employee -
Director
Proprietor
Proprietor
Employee
Accommodation to succession planning
High
Moderate
Low
Low
Moderate
Accommodation to estate planning
High
Moderate - High
High
Moderate - Low
Moderate
Ability to
restructure
High
Moderate
Low
Low
Moderate
Immediate and
ultimate rates of tax
Beneficiary rates - Marginal or corporate
Initial company rate
- Top up or refund
to personal rates
(Max rate 30% as at 2006)
Personal
marginal rates
Personal marginal
rates
Beneficiary rates
- Marginal or
corporate
The tax base
Normal - Ability to provide benefits to
associates without
FBT or Div 7A
Normal - benefits to 
employees and
shareholders subject 
to FBT and Div 7A
Business
expenses
limited
Business expenses
limited - Some
further financing
expenses
Normal - 
Ability to provide benefits to associates
without FBT or Div 7A
Access to
concessions
generally
Moderate
Initially good — but
subject to claw-back
Good
Good
Initially good -
Subject to clawback
Access to 50% CGT (Capital Gains Tax)
discount
Yes
No -  Special conditions 
apply at sale of business
for small privately owned businesses
Yes
Yes
Yes 
(post 1/7/01)
Access to small
business
concessions
Yes - Subject to
controlling
individual test
Yes - Subject to controlling
individual test and
claw-back
Yes
Yes
Yes - Subject to
controlling
individual test and
claw-back
Income diversion
and accumulation
High opportunity
Low to moderate
opportunity
Little
opportunity
Moderate
opportunity
Moderate
opportunity
Incidence of tax
losses
Quarantined in trust
Quarantined in
company
Personal
Partner level
Quarantined in trust
Ability to carry
forward tax losses
Subject to complex
carry forward rules
Unlimited
None
None
Subject to complex
carry forward rules
Incidence of
financing costs
Trust
Company or
shareholder
Personal
Partner level
Trust or unit holder
Cash flow
considerations
Good - Subject to
distribution or loan
Poor - Subject to
distribution or Div
7A commercial loan
Good
Good - Subject
to agreement
Good - Subject to
distribution of loan
Private and
business expenses
All business
All business
Mixed
Mixed
All business
Effect on social
security
entitlements
Possible
Direct
Direct
Direct
Direct
Personal exertion
rules
Potentially apply
Potentially apply
Do not apply
Do not apply
Potentially apply
Super contributions
Deductible - Subject to limits
Deductible - Subject to limits
Partially
deductible - Subject to
limits
Partially
deductible - Subject to limits
Deductible - Subject to limits
Possible application
of anit-avoidance
provisions
Medium — high
Low
Low
Low - Medium
Medium