Best Business Structure for a Startup in Australia: A Founder's Guide
Last Updated September 2026
You've got the idea, you've done the numbers on the back of a napkin, and you're ready to go. The last thing you want is to spend a week on paperwork.
But if you're planning to grow, bring in a partner, raise money or sell one day, the structure you choose now matters a lot more than it does for a business that'll stay small. Get it right early and the business can grow without being held back. Get it wrong and fixing it later can cost you tax, time and legal fees, usually at the exact moment you're busiest.
This guide is for founders with bigger plans. If you want the basics of each structure first, start with our guide to what business structure you should use for your small business.
Start Simple or Start Right?
The question that is asked by most new founders is: "Can't I just start as a sole trader and sort it out later?" Often, yes. Starting as a sole trader makes sense when:
you're testing an idea, with low start-up costs and little risk
you're the only owner, with no plans to bring anyone in soon
profits in the first year or two are likely to be modest.
However, setting up properly from day one is usually worth it when:
you have a co-founder. Splitting ownership is far cleaner with shares in a company than with an informal "we'll go halves".
you plan to raise money. Investors generally expect to buy shares in a company.
you're building something valuable to own, such as a brand, software, recipes, designs or other intellectual property (IP).
you're taking on real risk, such as signing leases, employing staff, taking on big contracts or borrowing.
you expect strong profits early, where personal tax rates would take a bigger bite.
What "Sorting It Out Later" Can Actually Cost?
Moving a running business into a new structure isn't just a name change. You're transferring assets, like goodwill, equipment and IP, from one owner to another, and that can trigger:
Capital gains tax (CGT): Transferring goodwill or IP you built up can create a taxable gain, even though no cash changes hands. The small business restructure roll-over can defer this if your turnover is under $10 million, the restructure is genuine and the same people ultimately own the business, but it has conditions that need checking.
Stamp duty: South Australia is friendlier here than most states, and it treats property differently depending on how the land is used:
Business assets other than land: (goodwill, IP, trading stock): no duty since 18 June 2015.
Commercial and industrial property: transfers of non-residential, non-primary production land ("qualifying land") are exempt from duty from 1 July 2018.
Residential and primary production land: still dutiable at the normal rates, so a restructure that moves a house, residential investment property or farm can still be expensive.
Other states have different rules, so check before moving property interstate.
Admin: A new ABN, new registrations, new bank accounts, new supplier and customer contracts, and possibly new leases and finance.
None of that is a reason to over-engineer day one. It's a reason to decide deliberately, not by default.
Structures Founders Commonly Use
Company
A company is a separate legal entity. It pays tax in its own right: 25% for base rate entities in 2025–26 (generally companies with aggregated turnover under $50 million and mostly active, not passive, income). For founders, the biggest advantage is ownership. Shares make it simple to split equity between co-founders, bring in investors or reward key staff later.
Holding Company and Trading Company
The trading company deals with customers, staff and suppliers, and a holding company owns its shares. Profits can be paid up to the holding company as dividends, away from the business that carries the risk. It's a common next step once the business is profitable, but rarely needed on day one.
Trust Owning Shares
Some founders hold their shares through a discretionary trust rather than personally, for flexibility in how dividends are distributed and some asset protection. If you're setting one up now, factor in the 30% minimum tax on discretionary trusts announced in the 2026–27 Budget, proposed to start on 1 July 2028. It isn't law yet, and the detail may change. Our post on family trust distributions in 2026 covers it in more detail.
Planning To Raise Money or Sell One Day?
This is where the 2026 tax changes matter most for founders:
The CGT discount is changing: Legislation passed in June 2026 replaces the 50% CGT discount with indexation, plus a 30% minimum tax on real gains, for gains accruing from 1 July 2027. Gains built up before that date keep the old treatment. (Treasury small business explainer)
Small business CGT concessions stay: The four existing concessions remain available. The turnover threshold for the 50% active asset reduction rises from $2 million to $10 million from 1 July 2027.
A founder-focused concession is proposed: Treasury has consulted on an Innovative Business CGT Concession giving a 50% discount on gains from eligible shares in innovative start-ups. Consultation closed on 28 September 2026. It isn't law yet, and its eligibility rules may change.
Investor incentives already exist: Eligible investors in an early stage innovation company can get a 20% non-refundable tax offset, capped at $200,000 a year.
The takeaway: if an exit or investment is part of the plan, who owns the shares, and from when, can change the tax outcome. Map it out before the shares are issued.
Traps That Catch Founders Early
Treating the company's bank account like your own. Money you take out of a company that isn't wages, dividends or a properly documented loan can be taxed as a dividend under Division 7A.
Assuming a company fixes your tax. If the income is mainly from your own personal effort, the personal services income rules can treat it as yours anyway.
Not deciding how you'll pay yourself. Wages, dividends and drawings are taxed differently. See how much you should pay yourself.
No shareholders' agreement. Co-founders fall out more often than anyone expects. Get a lawyer to put who owns what, and what happens if someone leaves, in writing early.
Your First 90 Days: A Founder's Setup Checklist
Choose your structure based on where the business is going, not just where it is today.
Get a director ID before becoming a director of a new company (free, through the Australian Business Registry Services).
Register the company with ASIC, then apply for an ABN, a TFN and a business name if you'll trade under a different name.
Register for GST when you expect turnover of $75,000 or more (you can register earlier).
Open a separate business bank account from day one.
Set up cloud accounting software and a simple routine for receipts and invoices.
Register for PAYG withholding before paying your first employee.
Plan for Payday Super. From 1 July 2026, super must generally reach employees' funds within 7 days of each payday.
Put the key agreements in place: a shareholders' agreement, a company constitution and trust deed where needed, and supplier and customer contracts.
Diarise your deadlines: BAS, ASIC annual review, tax returns and super.
Get Your Structure Right From The Start
Starting something with big plans? A short conversation before you register anything can save a lot of unwinding later.
That's why we put together the Entrepreneur Starter Pack for founders at this stage. We help you work out a structure that fits where your business is going, set up your company or trust and registrations, and guide you through your first few months in business, so you can focus on building it.
This article provides general information about business structures for startups and isn't a substitute for advice about your specific circumstances. The 30% minimum tax on discretionary trusts and the Innovative Business CGT Concession are proposals, not yet law, and details may change. Tax rules and thresholds are current as at September 2026. Speak with your accountant before choosing or changing a structure.
Frequently Asked Questions
What is the best business structure for a startup in Australia?
There's no single best structure. For founders planning to grow, raise money or bring in partners, a company is the most common choice, sometimes with a holding company or trust owning the shares. For a low-risk idea being tested by one person, a sole trader structure can be enough to start.
Should I start as a sole trader or a company?
Start as a sole trader if the risk is low, you're the only owner and profits are modest. Consider a company from day one if you have co-founders, plan to raise capital, are building valuable IP or expect strong early profits.
Can I change my business structure later?
Yes, but it can trigger CGT and admin costs. In SA, stamp duty generally only applies if residential or primary production land is transferred. The small business restructure roll-over can defer the tax in some cases if the conditions are met.
How much does it cost to set up a company in Australia?
From 1 July 2026, ASIC's registration fee for a proprietary company is $636, and the annual review fee is $342. Professional fees for advice, the constitution and registrations are extra.
Is a family trust a good structure for a startup?
It can be, but usually not as the business itself. Founders more commonly run the business through a company and have a family trust own the shares, which gives flexibility in how dividends are distributed. The Government has proposed a 30% minimum tax on discretionary trusts from 1 July 2028. It isn't law yet, but it could reduce that flexibility, so get advice before setting one up.
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