What is the difference between a company, partnership and trust?
Understand the four main business structures in Australia and how they differ for tax purposes.
Summary
The four main business structures in Australia are sole trader, partnership, company and trust. Each has different rules on who pays tax, who is liable for debts, and what reporting is required.
What this means
A partnership is 2 or more people carrying on a business together. The partnership itself lodges a tax return but does not pay tax – each partner reports their share of net income or loss in their own return.
A company is a separate legal entity from its owners. It lodges its own tax return, pays tax at the company tax rate, and can distribute profits to shareholders as dividends. A trust is a structure where a trustee holds property or income for the benefit of beneficiaries. A trust generally distributes income to beneficiaries who include it in their own returns. Choosing the right structure depends on your goals, risk tolerance and how you want profits to be treated.
Typical actions
- Consider who will own and control the business.
- Weigh personal liability against setup and compliance costs.
- Think about how profits will be distributed and taxed.
- Understand ongoing reporting obligations for each structure.
- Speak with a registered tax agent or business adviser before deciding.
Official ATO sources
Last checked: 25 August 2026
Business structures – key tax obligations
Main ATO hub for sole trader, partnership, company and trust obligations.
Related questions
- What tax obligations does a small business have?
- What is the company tax rate in Australia?
- What are director’s duties for tax purposes?
- When should a sole trader consider becoming a company?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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