As your trade business expands, the decisions you make today can have a lasting impact on your profitability, tax obligations, asset protection, and future opportunities. One of the most important decisions is choosing the right business structure.
Whether you’re a plumber, electrician, carpenter, builder, landscaper, or operate another trade business, the right structure should support your long-term goals—not just your current operations.
Why Your Business Structure Matters
Your business structure influences:
- How much tax your business pays
- How profits are distributed
- The level of personal asset protection you receive
- Your ability to secure finance
- Future succession and business sale options
- Ongoing compliance requirements
As your business grows, these factors become increasingly important.
Company Structure
A company is a separate legal entity that owns the business, enters contracts, and carries legal responsibilities independently of its owners.
Benefits of a Company
Limited liability
A company generally provides protection for shareholders by separating personal assets from business liabilities, subject to legal obligations and director responsibilities.
Potential tax advantages
Eligible businesses may benefit from the lower company tax rate applicable to base rate entities, allowing more funds to remain in the business for future growth.
Supports business growth
Companies are often viewed more favourably by lenders, investors, and larger clients due to their formal ownership structure and governance.
Business continuity
A company continues to operate even if ownership or management changes, making succession planning and future business sales more straightforward.
Considerations
- Less flexibility when distributing profits.
- Additional compliance requirements, including ASIC obligations.
- Companies generally cannot access the 50% capital gains tax discount available to eligible trusts and individuals.
Trust Structure
A trust is a legal arrangement where a trustee manages assets or business interests on behalf of beneficiaries. Family (discretionary) trusts are commonly used by Australian business owners.
Benefits of a Trust
Flexible income distribution
Trusts can distribute income among eligible beneficiaries, providing flexibility that may improve overall tax outcomes depending on individual circumstances.
Asset protection
When appropriately structured, trusts can provide an additional layer of protection for business and investment assets.
Capital gains tax concessions
Eligible trusts may access the 50% capital gains tax discount on qualifying assets held for more than 12 months.
Considerations
- Trust income generally needs to be distributed each financial year.
- Lending can sometimes be more complex.
- Trust deeds require ongoing administration and careful management.
Which Structure Is Better?
There is no one-size-fits-all answer. The best structure depends on your business objectives, family circumstances, growth plans, and risk profile.
A company may be more suitable if you:
- Plan to expand rapidly.
- Intend to employ more staff.
- Want to secure larger commercial contracts.
- May sell the business in the future.
- Expect to reinvest profits into growth.
A trust may be more appropriate if you:
- Operate a family business.
- Want flexibility when distributing income.
- Are focused on long-term wealth planning.
- Own valuable business assets that require additional protection.
The Hybrid Approach
Many growing Australian businesses choose a hybrid structure where:
- A company conducts the business operations.
- A discretionary trust owns the shares in the company.
This approach may provide:
- Access to company tax rates.
- Greater flexibility for future income distribution.
- Additional asset protection.
- Improved succession planning opportunities.
The suitability of this structure depends on each business’s circumstances and should be carefully assessed.
Questions to Ask Before Choosing a Structure
Before making a decision, consider:
- What are your growth plans over the next five years?
- Will you bring in business partners or investors?
- Do you intend to employ more staff?
- Are you planning to pass the business to family members?
- Could you sell the business in the future?
- How important is protecting your personal assets?
Answering these questions can help determine which structure best supports your long-term objectives.
Seek Professional Advice
Business structures should never be chosen based solely on tax outcomes. Asset protection, future flexibility, succession planning, financing requirements, and compliance obligations all play an important role.
At GBS Accountants & Advisors, we work closely with business owners to evaluate their current structure and recommend solutions that align with their long-term goals. Whether you’re starting a new venture or restructuring an existing business, we can help you build a strong foundation for sustainable growth.
Final Thoughts
Choosing the right business structure is one of the most important decisions you’ll make as a business owner. While companies often suit businesses focused on growth and expansion, trusts can provide valuable flexibility and asset protection. In many cases, a carefully designed combination of both may deliver the best outcome.
Professional advice early in your business journey can help you minimise risk, improve tax efficiency, and position your business for long-term success.
Let’s Talk! Need help understanding how the rate cut affects your finances or business strategy? Speak to GBS Accountants & Advisors today — your trusted partners in smarter financial decisions.
Disclaimer
The information provided in this article is general in nature and is intended for educational and informational purposes only. It does not constitute financial, taxation, legal, or business advice and should not be relied upon as such. Business structures and taxation outcomes vary depending on individual circumstances, and the suitability of any structure should be assessed based on your specific objectives and requirements.
Before making any decisions regarding your business structure, you should seek professional advice tailored to your circumstances. GBS Accountants & Advisors accepts no liability for any loss or damage arising from reliance on the information contained in this article without obtaining appropriate professional advice.
