Different Business Structures in Australia: Sole Trader, Partnership, Joint Venture, Trust, and Company

Commercial Law
Part based assignment

Table of Contents
Part A...........................................................................................................................................................2
Part B...........................................................................................................................................................6
References...................................................................................................................................................9
pg. 1

Part A
Elizabeth McQueen,
982, Sussex Building, King’s Street,
Sydney, NSW.
Re: Suitable business structure
John Smith,
6284, Park Avenue,
Sydney, NSW.
Date: 27th May, 2018
Dear John,
This is with reference to the advice sought on different business structures, which can be opted
in Australia, for the purpose of a person running their business in the nation. There are majorly four
different types of business structure in the nation and these include sole trader, partnership, trust and
company. Even though there are other forms of business structure available, like joint venture; but
these four are the predominant ones. For the purpose of this advice, the different aspects of these
business structures have been detailed below.
SOLE TRADER
A sole trader or sole proprietor is the simplest form of business structure in any nation. This
form allows a person to start their business alone and they are the whole sole in charge of such
business. The Tax File Number of the individual running sole proprietorship is used for the purpose of
filing tax returns of sole trader. Apart from this, the sole trader also has to get a registered ABN and
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often is required to get a GST registration as well. The advantages of it include ease of formation, full
control over business operations, privacy, flexible decision making, and taking advantage of taxable
losses and profits. However, this form has its fair share of disadvantages as well. These include limited
capital, unlimited liability of the sole trader, huge risk profile, business life being equivalent or less than
life of sole trader, and limited talent pool (Gibson & Fraser, 2014).
PARTNERSHIP
When two or more individuals combine together to carry out a business with shared interest in
a mutual manner, for the purpose of earning profits, a partnership is formed, as per Joyce v Morrissey
[1998] TLR 707. As is the case with sole traders, forming partnership is not a work of hassle. This is
particularly because the different partnership legislation in the nation does not make it an obligation to
create a partnership deed. However, it is always suggested to draw a partnership deed so every aspect
of partnership is clarified. The partnership form has its own Tax File Number, ABN, GST registration and
is also required to file tax returns annually. Partners are free to decide on the sharing of interest and
capital contributions. Even though the partnership is required to file a tax return, no income tax is
required to be paid, since the profit or losses are distributed amongst partners based on their equity
interest (Abbott, Pendlebury & Wardman, 2007).
The advantages of partnership include minimum setting up costs, shared obligations, higher
financial contribution in comparison to sole traders, ease of operations, tax losses accessible to partners,
flexibility, privacy, help in decision making, and more skill base. The disadvantages of it include unlimited
liability, joint and several liabilities of partners, disagreements in partnership leading to dissolution of
partnership, decision making conflicts, transferring or terminating partnership can be complicated, and
limitations on number of partners based on jurisdiction in which the partnership is (Latimer, 2012).
JOINT VENTURE
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