Company vs Trust: Which Structure Fits Your Business

Neither a company nor a trust is the right choice for every Australian business. A company is a separate legal entity, while a trust holds assets for beneficiaries; the trustee is responsible for running the business. For business structure advice on choosing a company vs a trust, tax is one factor: the Australian Taxation Office says the standard company tax rate is 30%, with a 25% rate for base rate entities.

It’s understandable to focus on tax, but your business structure also affects control, liability, profit allocation and record-keeping. The right fit depends on how your business operates and what you need the structure to support.

This article compares the practical differences between a company and a trust, explains what can affect restructuring costs and outlines factors to consider before deciding. Reviewing your business plans, cash flow and longer-term goals can help clarify your options.

Should I Set My Business Up As A Trust Or Company?

A company may suit a business that plans to retain profits, while a trust may suit one seeking flexibility in distributions. A key difference is who controls the structure and who may be liable if the business owes money.

Tax and Funding Effects

Tax treatment and access to funding can differ between a company and a trust. The Australian Taxation Office states the standard corporate tax rate for Australian companies is 30%, and base rate entities pay 25%. Companies can retain profits rather than distribute them to owners, which may help a business plan for working capital or reinvestment. Trust income is generally distributed to beneficiaries, so consider how that approach fits your cash flow and business plans.

Registered companies can access some government grants and incentives, including the R&D Tax Incentive and ESIC tax incentives. A trust may offer distribution flexibility, but it does not provide the same company structure for these incentives. Before choosing, compare your likely funding needs, how you plan to use profits and the tax treatment of expected income.

Asset Protection Across Structures

Asset protection depends on the structure and how it is set up. A proprietary limited company is a separate legal entity, and shareholders are generally liable only up to the amount invested in their shares. A trust holds assets for beneficiaries, while the trustee manages the business and its assets. This distinction matters when deciding who controls business property and how business risks may affect personal assets.

An individual trustee may be personally liable for trust debts. Appointing a company as trustee separates the trustee role from an individual and is commonly considered for family trusts when asset protection is a priority. Neither arrangement removes every risk: for example, a personal guarantee for a company loan may still make the guarantor liable.

Trustee Liability and Limited Liability

A company is generally responsible for its business debts, while its directors make business decisions. Shareholders’ limited liability does not remove directors’ responsibilities, and a personal guarantee can create a separate obligation. In a trust, the trustee makes business decisions and is responsible for trust debts. An individual trustee may face personal liability.

Using a company as trustee changes who holds that responsibility, but adds another entity to administer. For example, a family trust with a corporate trustee involves both the trust and the trustee company. Before choosing this arrangement, consider who will make decisions, hold assets and bear obligations.

The table compares practical trade-offs. “Funding access” refers to the registered-company incentives described above, not a promise of funding approval.

Option	Profit handling	Liability	Funding access
Company	Can retain profits	Company generally carries business debts	Some company-only incentives may apply
Trust with individual trustee	Income generally distributed to beneficiaries	Trustee may be personally liable	Does not provide registered-company access
Trust with corporate trustee	Income generally distributed to beneficiaries	Company acts as trustee; personal guarantees remain relevant	Trust remains distinct from a registered company operating in its own right

Weigh expected profits, plans to retain capital, funding needs, asset ownership and who will be responsible for business debts.

Changing a business structure and associated costs

Changing from a company to a trust, or vice versa, can affect tax treatment and ownership. The consequences depend on the assets being transferred, their values and how the transfer is arranged. Map these effects before changing the structure.

Trust Setup and Complexity Costs

A trust deed sets out how the trustee manages the trust. A trust with a corporate trustee also involves establishing a separate company, with its own setup and ongoing administration.

Setting up a trust is highly complex, while setting up a company is complex. Trust setup costs are rated high, compared with medium to high for companies. These differences reflect the work involved in establishing the deed, appointing a trustee and keeping records for the trust and any trustee company.

Setup and Ongoing Compliance Costs

The annual review fee is A$329 per year. These are company registration and annual review costs, not the full cost of operating the structure. Allow for ongoing administration, including maintaining registration details and handling company records.

Both companies and trusts need separate bank accounts and ongoing administration and reporting. A company must remain registered and pay its annual review fee; a trust needs records that follow its deed and trustee arrangements. A corporate trustee adds another entity to administer. Compare setup with ongoing work rather than choosing based only on the first invoice.

Tax Consequences of Structure Changes

Tax consequences depend on the assets and business interests being transferred, their values and the transaction’s terms. Moving assets between a company and a trust can change who owns and controls them, affecting how the business reports its financial position and income.

Before changing structure, list the assets, liabilities, retained profits and contracts involved. Then model how the proposed transfer could affect the business’s tax position and cash flow. Transferring equipment, for example, differs from transferring shares or business operations. The tax effects depend on what changes hands and how the transaction is implemented, so include those details in your restructuring plan.

What is a discretionary trust?

A discretionary trust is a structure in which the trustee decides how to distribute trust income among beneficiaries. The deed sets the framework for those decisions and therefore shapes the trust’s flexibility.

Types of Trust Structures

A discretionary trust gives its trustee discretion over which beneficiaries receive income and how much each receives. By contrast, a unit trust represents interests through units, while a fixed trust sets beneficiaries’ entitlements instead of leaving distributions to the same discretion.

A hybrid trust combines features of discretionary and fixed or unit arrangements. The name alone does not determine how a trust operates: review the deed to understand who may benefit, how income can be distributed and what rights attach to an interest. A business seeking flexible distributions, for example, has different priorities from investors expecting defined interests.

Distribution flexibility comes with a tax responsibility. A discretionary trust must distribute its profits to beneficiaries each financial year; otherwise, the trustee pays tax on undistributed profits at the highest marginal rate, stated as 47% in the research facts. Income or capital gains distributed by an Australian family trust are taxed to beneficiaries at their individual marginal tax rates. The trustee’s decision should therefore consider beneficiaries’ circumstances and the trust’s available income.

Before making a distribution, review the deed, the trust’s accounts and the intended beneficiaries. Record the amount distributed and who receives it, and keep the decision consistent with the trust’s records. This connects the trustee’s choices with the trust’s tax reporting and makes its financial position easier to track.

Discretionary Trusts Holding Company Shares

A discretionary trust can hold shares in a company, with the trustee holding the shares for the trust’s beneficiaries. The company remains the entity operating the business. This arrangement can combine company operations with a trust’s distribution flexibility.

Holding shares through a trust does not give beneficiaries fixed rights to company income or capital. Unlike shareholders who hold shares directly, discretionary trust beneficiaries have no automatic entitlement to trust income or capital. The trustee’s decisions are governed by the deed, so consider how control, distributions and future ownership fit together before using this arrangement.

Land tax can also affect the choice, particularly for property investments in New South Wales. From 2025 onward, discretionary and special trusts don’t receive the A$1,075,000 land tax-free threshold, and trust land is taxed from the first dollar at 1.6%. A trust that doesn’t exclude foreign beneficiaries may also face a 4% surcharge land tax on residential property. These NSW rules make the trust deed and property plans important parts of the decision.

If you are considering a discretionary trust, compare distribution flexibility with beneficiary rights, tax treatment and any property exposure. A unit, fixed or hybrid structure may better reflect defined investor interests, while a discretionary trust centres decisions on its trustee and deed.

Legal differences between companies and trusts

A company is a separate legal entity, while a trustee manages a trust under its deed. Directors make company decisions and carry director responsibilities; trustees manage trust business and are responsible for trust obligations.

Company Legal Identity and Continuity

Australian companies are regulated by the Corporations Act 2001, according to the Australian Government, Federal Register of Legislation. Because a company has a separate legal identity, it can enter contracts and hold responsibility for business risks in its own name. The company’s legal identity continues even if its shareholders or directors change.

A trust is not a separate legal entity. The trustee holds trust assets for beneficiaries and acts under the trust deed, which sets out what the trustee may and may not do. Trusts generally have a limited lifespan of 80 years, while companies can exist indefinitely. That difference matters when planning long-term ownership or succession, where ensuring real property and key assets are formally titled to the trust is essential; in US jurisdictions, for instance, HEGGSTAD HELP assists with petitions to transfer omitted property into living or irrevocable trusts.

Company Ownership and Liability

Shareholders own a company, while directors make its key business decisions. A proprietary limited company can have a maximum of 50 shareholders. Shareholders are generally liable only up to the amount invested in their shares, but that protection does not remove liability under a personal guarantee.

In a trust, the trustee is listed as the owner and makes business decisions on the trust’s behalf. Beneficiaries may benefit from trust assets but do not own them. A trustee may be personally liable for trust debts, while a company acting as trustee places a corporate entity in that role. The deed and trustee arrangement therefore shape who carries responsibility.

Directors and trustees have different roles, but neither is merely administrative. Directors oversee company decisions and may be liable for certain conduct, including trading when they know the company cannot pay its bills. Trustees must act within the trust deed and manage the trust’s business and assets for beneficiaries.

ASIC regulates company directors’ duties, while the trust deed governs a trustee’s authority. For example, a director deciding whether a company can meet its obligations faces different responsibilities from a trustee deciding whether a proposed action is allowed under the deed.

Company obligations include keeping registration details current and maintaining company records, such as minutes of directors’ meetings. A company must notify ASIC of changes to its registered details within 28 days. Companies also have high legal obligations, while trusts have medium legal obligations in the business.gov.au comparison.

A trust is not on the companies register, but a company acting as its trustee must be registered. Trust details, including beneficiaries’ identities, generally do not need to be disclosed publicly. Compare the company’s formal reporting duties with the trust deed’s rules, then consider who will handle each responsibility.

Professional advice on business structures

Australian businesses can use four structures: sole trader, partnership, company or trust. Choosing between them means weighing tax, personal liability, control, licences, ongoing costs and paperwork, rather than focusing only on the headline tax rate. An individual starting alone has different needs from people sharing decisions and profits in a partnership. Sound business structure advice on a company versus a trust should account for these practical differences.

To choose and set up a structure, map how the business will operate, who owns its assets, how profits will be used and what risks it carries. Then compare tax treatment, control, liability and administration across realistic options. An accountant can assess financial and tax implications; a lawyer can advise on legal documents, ownership and obligations.

Use this practical review before settling on a structure:

• Ownership: Identify each owner, partner, shareholder or potential trust beneficiary, and clarify who will make key decisions.
• Money: Consider how profits will be used, whether the business needs to retain capital, and how cash flow will be tracked.
• Risk: List business debts, contracts and valuable assets, then consider how liability may affect each owner or trustee.
• Administration: Compare the records, reporting and ongoing tasks each structure requires.
• Future plans: Consider whether new members, investors, family succession or estate planning could shape ownership decisions.

For example, partners planning to share management need clear decision-making arrangements, while a sole operator may prioritise simpler administration. A startup seeking to retain profits may consider a company, while a family business may consider how its structure relates to succession and estate planning. Discussing who may eventually own or control business interests can help align these plans, without treating business structure as a substitute for personal estate planning. For families navigating broader wealth succession or cross-border trust and estate administration, consulting specialized resources such as sheikhnajam.com can provide useful insight into complex multi-jurisdictional arrangements.

After choosing, make a setup plan covering registration, governing documents, banking and accounting records. For a company, plan for registration and company records; for a trust, ensure the deed reflects the intended arrangements. Track the numbers from the outset, then review performance and cash flow quarterly. If profits, ownership or plans change, reconsider whether the structure still supports the business.

Bring your financial records, business goals and succession considerations into the discussion. An accountant can help connect tax outcomes with the business’s plans, while a lawyer can address legal documents. For business structure advice on choosing between a company and a trust, discuss your business structure and plans as you compare options and decide on practical next steps.

Brown Hamilton Partners: Tax Advisory

Brown Hamilton Partners provides Tax Advisory and Business Planning & Coaching to help business owners assess how their structure connects with tax, profits and financial plans. These services can support decisions about setting up a structure or considering a change. Bring your current structure, business goals, expected profits and cash flow picture to the discussion.

Business Tax Returns and Bookkeeping & BAS Lodgement can help keep financial records and tax reporting aligned with your structure. This is useful when business activity changes, profits are retained or distributed differently, or regular reviews reveal new planning needs. A clear view of the numbers makes the trade-offs easier to understand and supports informed decisions.

Contact Brown Hamilton Partners to discuss your business structure and tax planning.

Make your next structure decision with clarity

Before settling on a structure, agree on what matters most to everyone involved. Owners may value different things, such as decision-making authority, flexibility for future changes or alignment between business and personal plans. Identifying those priorities can focus the discussion and distinguish essential needs from preferences.

Write down the questions you still need answered and the assumptions behind your preferred option. This gives business structure advice on choosing a company versus a trust a clear starting point, grounded in the decisions your business needs to make.

Brown Hamilton Partners can help you consider the financial and tax questions alongside your business plans. Discuss your business structure options and take the next step with a clearer sense of your priorities.

Frequently Asked Questions

Why Does Your Business Structure Matter?

Your structure influences how the business handles income, ownership, decisions and financial records. It can also affect personal exposure to business debts and the work required to meet ongoing obligations. For example, a Melbourne business planning to bring in investors should consider how ownership interests and decision-making will be arranged. Reviewing these factors together helps you assess whether the structure supports current operations and future plans.

How to Decide Which Structure Suits You?

Start by mapping who owns the business, how profits will be used, what risks it carries and what growth you expect. Then compare how each suitable structure addresses those needs. A sole operator who prioritises direct control may weigh options differently from partners who need agreed roles or a family business planning succession. For a Melbourne business, include expected cash flow and record-keeping demands in the comparison, not just tax.

What is a Trading Trust?

A trading trust is a trust used to operate a business. The trustee conducts the business and is responsible for its operations, while beneficiaries may benefit under the trust arrangement. The trustee can be an individual or a company. For example, a company may act as trustee while the trust operates the business. The trust deed and trustee arrangement shape how decisions and assets are managed.

What ongoing obligations does a company have?

An Australian company must remain on the companies register, keep its registered details current and pay an annual review fee. It also needs to maintain company records, including minutes of directors’ meetings, and meet applicable meeting and reporting obligations. Changes to registered details must be notified to ASIC within 28 days. These duties continue beyond initial registration, so plan for regular record-keeping and compliance tasks.

What are the differences between a company and a trust in Australia?

A company is a separate legal entity, owned by shareholders and directed by its officeholders. A trust is an arrangement in which a trustee holds and manages assets for beneficiaries under a trust deed. The trustee, rather than the beneficiaries, makes decisions about the trust’s business. This distinction affects how ownership, authority and obligations are organised. Compare who controls the structure and who carries its responsibilities.

What are the tax rates for Australian companies and trusts in 2026?

The Australian Taxation Office states the standard corporate tax rate is 30%, while base rate entities pay 25%. A trust generally distributes taxable income to beneficiaries, who pay tax at their own marginal rates. Undistributed trust income may be taxed at the highest marginal rate, stated as 47%. The tax outcome depends on the entity’s circumstances and how income is treated or distributed.

What are the setup costs for an Australian company versus a trust?

A trust with a corporate trustee also requires a separate company, adding setup and administration tasks. These amounts cover specific setup items, not every cost involved in establishing or operating either structure.

What are the ongoing ASIC, accounting and tax compliance costs for companies and trusts in Australia?

The ASIC annual review fee for an Australian proprietary company is A$329 per year. Accounting and tax compliance costs depend on the structure’s transactions, records, reporting needs and trustee arrangements. A trust with a corporate trustee involves administration for both entities. Companies and trusts also need separate bank accounts and additional record-keeping. Consider the recurring workload alongside fees when comparing ongoing costs.