For a sole trader,there are lower start up costs and simple to simple to both set up and operate. There are less regulations to follow for this structure. However, a sole trader has unlimited liability for debts and obligations and less ability to raise capital.
You need to register your business name and ABN and you can use your individual TFN when lodging your income tax return.
For a trust, this requires a formal trust deed, and when operating a trust, the trustee is responsible for its operation. There are various tax advantages for using the trust business structure. The trustee can be a company. For example, a trustee has discretion over what share income or capital is distributed to which beneficiary in a discretionary trust.
You need to choose a trustee, make a trust deed, apply for the ABN and TFN and then set up a trust bank account.
In terms of a partnership, they are relatively easy and inexpensive to establish and there also less regulations to follow. Partners don’t pay tax on income earned, but each partner individually pays tax on the share amount of the net partnership income they each receive. A partnership needs to lodge a partnership tax return with ATO each year. All partners are legally and financially responsible for the business.
You need to establish a business name and register the partnership. A partnership required a separate TFN and must apply for an ABN to use it for business matters.
For a company, this needs to be registered with ASIC and must comply with more regulations in comparison to other business structures. It is also more costly to establish, but you will have more access to capital. There will also be limited liability since a company is a separate legal entity (less responsibility for debts).
You need to establish a company name, outline how the company will operate and under what regulations, register the company and register an CAN on ASIC before applying for an ABN.
For more information on which business structure is right for you, see our blogs on Company V Sole Trader and also What is a Partnership.