The structure you choose when you start a business in Queensland affects almost everything that follows: how much tax you pay, who can sue you personally, how easily you can bring in investors, and what happens when you eventually want to exit. Yet many founders make the decision in fifteen minutes with an online incorporation tool.
Below is the framework we use with new clients at Khoury Scott & Associates. It is not legal advice for your specific circumstances — that requires a conversation — but it should help you understand the trade-offs before you commit.
The four structures most Queensland businesses choose between
Sole trader
You and the business are the same legal person. It is the cheapest and simplest option — no ASIC fees, no separate tax return, no corporate compliance. The catch is unlimited personal liability: a creditor or claimant can pursue your home, savings and other assets to satisfy a business debt.
Sole trader works for very low-risk activities with minimal capital and no employees. For most service businesses with real client exposure, the liability profile is wrong almost from day one.
Proprietary limited (Pty Ltd) company
A separate legal entity that you own through shares. Liability is generally limited to the assets of the company (plus any personal guarantees you have signed). The company pays tax at the corporate rate — currently 25% for base rate entities — and you draw a salary or dividends.
A Pty Ltd is the default structure for most small to mid-sized operating businesses in Australia. It is the easiest structure to raise capital into, to bring in co-founders, and to eventually sell.
Discretionary (family) trust
A trustee — usually a corporate trustee Pty Ltd — holds the business assets on behalf of a defined class of beneficiaries (typically the founder's family). Income can be distributed flexibly each year to whichever beneficiaries are most tax-effective.
Discretionary trusts are powerful for distributing profits in a family group but can complicate borrowing (lenders sometimes want personal guarantees from beneficiaries) and are usually not appropriate where outside investors will hold equity.
Unit trust
Like a discretionary trust, but with fixed entitlements expressed as units. Useful where two or more unrelated parties want to share a business in defined proportions but want the trust tax treatment rather than a company.
The questions that drive the decision
- —What is your liability exposure? Service business with professional indemnity, product business with consumer risk, employer of staff — these all push you toward limited liability.
- —Who owns the business? Solo founder, family group, co-founders, external investors — each suggests a different vehicle.
- —How will profits be taken out? Reinvested, distributed to family members, paid as salary, retained for a future sale — the answer changes the tax math.
- —Do you plan to raise capital? Trusts are awkward for investors; companies are the standard.
- —What's the exit horizon? A business you intend to sell in five years is structurally different from one you intend to hand to the next generation.
The most common structures we set up
For owner-operated Queensland businesses with no external investors, we most often see one of two structures: a Pty Ltd company owned directly by the founder, or a Pty Ltd company owned by a discretionary trust (with the founder as trustee director). The second adds a layer of asset protection and distribution flexibility, in exchange for a small amount of additional setup and ongoing complexity.
For businesses with co-founders, we typically use a Pty Ltd with a properly drafted shareholders' agreement, regardless of whether the shares are held personally or through individual trusts.
Common mistakes we see
- —Incorporating online and discovering 12 months later that the structure does not support the investor coming in.
- —Operating as a sole trader with employees and significant client contracts.
- —Using a personal name as trustee of a discretionary trust — which leaves the personal trustee on the hook for trust liabilities.
- —Failing to document the founder's intentions in a constitution or shareholders' agreement.
If you are about to start a business in Queensland — or you are 12 months in and starting to feel the constraints of your current structure — a short scoping conversation is usually enough to know whether a restructure is worth doing.
