Sole Trader vs Company vs Trust vs Partnership: What’s the Difference?

Gotax Publishing – 18 November 2025
Estimated reading time: 7 minutes

Choosing a Business Structure? Here’s What You Need to Know

Starting a business in Australia? One of your first—and most important—decisions is choosing the right structure.

Should you register as a sole trader, company, trust, or partnership? Each structure has different tax obligations, legal responsibilities, and compliance requirements.

This guide breaks it down clearly, so you can choose the right path—and lodge your tax return with confidence.

1. Sole Trader

What it is:
A sole trader is an individual operating a business in their own name. It’s the simplest and most common structure in Australia.

Key features:

• Easy and inexpensive to set up
• You use your personal TFN
• You’re personally liable for all debts
• You report business income in your individual tax return
• You can still register a business name and ABN

Tax rate:

• Taxed at individual marginal rates
• Eligible for the tax-free threshold

Best for:
Freelancers, tradies, consultants, and side hustlers

2. Partnership

What it is:
A partnership is a business owned by two or more people who share profits, losses, and responsibilities.

Key features:

• Requires a formal partnership agreement
• Must have its own TFN and ABN
• Lodges a separate partnership tax return
• Each partner declares their share of income in their individual return
• Partners are jointly and severally liable

Tax rate:

• The partnership itself doesn’t pay tax
• Partners are taxed individually on their share

Best for:
Family businesses, joint ventures, professional practices

3. Company

What it is:
A company is a separate legal entity registered with ASIC. It can own assets, incur debt, and sue or be sued.

Key features:

• Must have a director and registered office
• Pays tax at the company rate (25% or 30%)
• Must lodge a company tax return
• Limited liability for shareholders
• More complex reporting and compliance

Tax rate:

• 25% for base rate entities
• 30% for others

Best for:
Growing businesses, startups, and those seeking limited liability

4. Trust

What it is:
A trust is a legal relationship where a trustee holds assets or income for the benefit of others (beneficiaries).

Key features:

• Must have a formal trust deed
• Trustee lodges a trust tax return
• Income is distributed to beneficiaries, who pay tax on their share
• Can be discretionary (flexible) or fixed (set entitlements)
• Often used for asset protection and tax planning

Tax rate:

• Beneficiaries are taxed at their marginal rates
• Undistributed income may be taxed at the top marginal rate

Best for:
Family businesses, investment vehicles, asset protection strategies

Comparison Table

Sources: ASIC, ATO

FAQs

Can I change my business structure later?
Yes. Many businesses start as sole traders and later transition to a company or trust.

Do I need an ABN for all structures?
Yes. All business structures require an ABN to operate legally and invoice clients.

Which structure gives the best tax refund?
It depends on your income, deductions, and how profits are distributed. Gotax helps you claim every legal tax deduction.

Can Gotax lodge tax returns for all structures?
Absolutely. Gotax supports sole traders, partnerships, companies, and trusts.

Choose Smart, Lodge Smarter

Your business structure affects everything—from how much tax you pay to how much risk you carry. Whether you’re just starting out or scaling up, choosing the right structure is critical.

Gotax helps you lodge the right tax return for your structure—fast, compliant, and built for Australian businesses.

Lodge smarter. Deduct better. Use Gotax.

Gotax Covers All Business Structures—Are You Paying Too Much?

Gotax supports all types of business tax returns with transparent pricing and fast online lodgement. Get your quote now:

• Company Tax Returns — from $450
• Trust Tax Returns — from $400
• Partnership Tax Returns — from $350
• Superannuation Year End — from $950
• Individual Businesses — $140

Disclaimer

This blog is an information source only. Make sure you seek professional advice, like Gotax, before you act on its contents.