Corporations and Business Structures

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Corporations and Business Structures

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Part A
In Australia, most common business structures include a sole trader, partnership and
company. A sole trader is the easiest business structure which is available for parties
because they did not have to incur huge costs in its establishment. There are no stricter
legal compliances which are imposed on the sole trader than compared to a partnership and
company.1 The sole trader has unlimited liability in the business, and the administration
burden lies on the sole trader himself. The registration cost of a sole trader is free unlike a
company. The court can use the personal assets of the sole trader in order to fulfil the
liabilities or debts of the business. They have to apply for an Australian Business Number
(ABN) which is free.
Often people wanted to go into business with others in order to share the work, capital and
risks while also making sure that the administration process is simple; they can start a
partnership firm which is not a legal entity. It means that the partners can sue or get sued in
the business rather than the partnership. The firm has to apply for receiving an ABN.2 Each
state has provides different partnership act such as Partnership Act 18913 of Queensland
(PA); however, the provisions of these acts are similar. The administration burden is on the
partners who are equally responsible for running the business and the administration costs
are considerably lower than compared to a company.
Parties can also establish a proprietary company while establishing their business in
Australia. These companies are given under the provision of the Corporations Act 2001
(Cth).4 A proprietary corporation has a separate legal entity unlike a sole trader and
partnership firm which means it can form a contractual relationship and it can sue or get
sued. The administration burden of a company is imposed on its directors who cannot be
held personally responsible for their actions. The initial costs of incorporating a proprietary
company are $488, and the cost of registration of the name is $35.5 The administration cost
1 Business,
Business structures and types (2018) <https://www.business.gov.au/planning/business-structures-
and-types>.
2 William D Duncan,
Joint ventures law in Australia (Federation Press, 2012).
3 Partnership Act 1891
4 Corporations Act 2001 (Cth)
5 Business,
What are the set-up steps and costs? (2018) <
https://www.business.gov.au/change-and-growth/restructuring/sole-trader-to-a-company/difference-
between-a-sole-trader-and-a-company/what-are-the-set-up-steps-and-costs>.

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of the company is high because of filing of annual review, conducting of meeting and record
keeping which is higher than both sole trader and partnership.