Insights

Many small businesses in Western Australia start as sole traders – it’s simple, low-cost, and easy to manage. But as your business grows, so do your risks and responsibilities. You may need a structure that offers better protection, tax flexibility, or room to scale.

At West Perth Legal, we help WA business owners transition from sole trader to company, trust, partnership or hybrid structures. This simple guide explains the key options and what to consider before making the switch.

Why Change from Sole Trader?

Sole trader structures work well early on, but they have limits. You might consider changing if:

• You’re hiring staff or taking on bigger contracts
• You want to reduce personal liability
• Your income is growing and you need tax flexibility
• You’re planning to bring in a partner or investor
• You want to protect personal or family assets
• You’re preparing for long-term growth or sale

Below, we discuss some of the common alternative legal structure options you can choose. It is important to discuss your options with your accountant and lawyer before committing.

Option 1 – Company (Pty Ltd)

A company is a separate legal entity. It owns assets, signs contracts, and is responsible for its own debts.

Benefits:

• Limited liability for owners
• More credibility with clients and tenders
• Easier to raise capital or bring in shareholders
• Fixed company tax rate
• Better suited for employing staff

Drawbacks:

• Higher setup and compliance costs
• Directors can still be liable in some cases
• You can’t just “draw” money – profits must be paid as wages or dividends

West Perth Legal offers fixed fee for setting up a Pty Ltd company and preparing company legal documents. Contact us for an obligation free quote.

Option 2 – Trust

A trust holds assets on behalf of beneficiaries. It’s often used by family businesses or for asset protection. There are different types of trusts for different purposes. In general:

Benefits:

• Flexible income distribution
• Strong asset protection
• Useful for estate planning
• Private – no public register of beneficiaries

Drawbacks:

• Complex setup and strict rules
• Losses can’t always be passed on
• Some lenders prefer companies

Do you need a trust deed or trust set up advice? Explore our Trust and Asset Protection services.

Option 3 – Partnership

A partnership is two or more people running a business together and in WA, it is regulated under the Partnership Act 1895 (WA).

Benefits:

• Easy to set up
• Shared skills and resources
• Flexible profit-sharing

Drawbacks:

• Partners are personally liable for each other’s actions
• Disputes can destabilise the business
• Harder to bring in new partners

If you’re forming a partnership, we can help prepare a Partnership Agreement.

Option 4 – Hybrid Structures

Some businesses combine structures. For example, a company acting as trustee for a family trust.

Benefits:

• Strong asset protection
• Tax planning flexibility
• Control over ownership and risk

Drawbacks:

• Higher setup and admin costs
• Requires ongoing legal and accounting support

What to Consider Before You Change from a Sole Trader

Before switching from sole trader to another structure, think about:

• Your long-term goals
• Tax and ATO implications
• Risk and liability
• Whether you’ll hire staff or seek investors
• Licences, contracts or ABNs that may need updating
• How your business is perceived by clients and suppliers

Changing structure isn’t just paperwork, it’s a strategic move that affects your legal, tax and commercial future.

How West Perth Legal Can Help

We offer professional, plain-English legal support to help you restructure with confidence. Our services include:

• Business structure reviews and legal advice
• Company, trust and partnership setup
• Drafting trust deeds, shareholder and partnership agreements
• Transferring contracts, licences, assets and employees
• Protecting your IP and business assets

We also work closely with your accountant to ensure your structure is tax-effective and commercially sound.

Ready to Restructure?

If you’re a sole trader in WA thinking about switching to a company, trust or partnership, West Perth Legal can guide you through the process clearly, efficiently and with your long-term success in mind.

Contact us today for tailored legal advice.

Disclaimer: the content of this article is provided as general information only and does not constitute legal or other advice on any specific matter and should not be relied upon as such. If you are seeking or require legal advice, please contact our lawyers.