When starting a business in Australia, one of the most critical decisions is choosing the right business structure. The two most common options are companies and partnerships, and both have distinct legal, financial, and operational implications under Commercial and Corporate Law. Understanding these differences will help you choose the structure that best aligns with your goals.

What Is a Company?

A company is a separate legal entity, distinct from its owners (shareholders). It is incorporated under the Corporations Act 2001 (Cth) and regulated by the Australian Securities and Investments Commission (ASIC). The company itself can own property, enter into contracts, and be sued in its own name. The most common structure for small and medium businesses is the proprietary limited company (Pty Ltd).

Key Features of a Company:

• Separate Legal Identity: The company is independent of its shareholders.
• Limited Liability: Shareholders’ liability is limited to the unpaid amount on their shares.
• Corporate Governance: Directors have legal duties and obligations under the Corporations Act.
• Taxation: Companies pay a flat corporate tax rate (currently 25% for base rate entities).
• Regulatory Compliance: Ongoing reporting obligations with ASIC, including financial statements and annual reviews.

Setting up a company can be complex, but it offers greater protection and credibility for growing businesses.

What Is a Partnership?

A partnership is a business arrangement where two or more people carry on a business together with the intention of making a profit. Partnerships are governed by state-based Partnership Acts and are not separate legal entities, meaning partners are personally liable for the partnership’s debts.

Key Features of a Partnership:

• No Separate Legal Identity: The business and the partners are legally the same.
• Unlimited Liability: Partners are personally liable for all partnership debts and obligations.
• Taxation: Partnerships do not pay tax as an entity. Each partner declares their share of income on their individual tax return.
• Fewer Compliance Requirements: No ASIC reporting obligations, making it simpler to maintain.

Although partnerships are easier and cheaper to set up, the unlimited liability risk can be significant.

Company vs Partnership: Key Differences

Aspect	Company	Partnership
Legal Status	Separate legal entity	Not a separate legal entity
Liability	Limited to shareholders’ investments	Unlimited – partners personally liable
Taxation	Company tax rate (flat)	Individual tax rates for partners
Ownership	Shareholders	Partners
Regulation	Corporations Act & ASIC compliance	State-based Partnership Acts

Which Structure Is Right for You?

Choosing between a company and a partnership depends on:

• Risk Exposure: Companies provide better protection through limited liability.
• Growth and Investment: Companies can issue shares and attract investors more easily.
• Compliance Tolerance: Partnerships have fewer reporting obligations but expose partners to personal risk.

If you plan to grow your business, seek investment, or protect personal assets, a company may be the better option. For small ventures or short-term projects, a partnership might be more practical.

Why Legal Advice Is Essential

The decision between a company and a partnership has long-term consequences for taxation, liability, and compliance. A wrong choice can lead to disputes, unnecessary tax burdens, and financial risk. Consulting a Commercial and Corporate Law expert ensures your structure aligns with your business goals and provides legal protection.

Both companies and partnerships have their advantages and disadvantages. Your choice will depend on your business objectives, risk appetite, and long-term strategy. The right structure can save you money, reduce risk, and support your growth plans.

Need expert guidance on business structures? Our experienced team at New South Lawyers specialises in Commercial and Corporate Law. We provide tailored advice to help you start and grow your business with confidence.

Contact New South Lawyers today to book your consultation.