Legalities of Business Structures – What You Need to Know

Ensuring Corporate Documents' Enforceability - What to Know


Choosing the right business structure for your commercial enterprise is essential to your success in your market. Knowing your business structure also keeps you out of legal troubles that could cost you your livelihood. That is why you need to know at least the basic differences between a sole trader and a company.

This article will discuss the essential business and legal implications of the three primary business structures: sole proprietorship, partnership, and company. Take this as an opportunity to ensure that you avoid any costly legal battles and sustain your professional career in your industry.

1. Sole Proprietorship

The sole proprietorship is the most basic business structure wherein you initiate trades as both the owner and operator of your business, meaning you have autonomy and independence for all assets.

Sole proprietorships are also the most affordable to set up because there are relatively lower costs than other complex business structures. You also have unlimited access to your profits and losses. However, there are some costly legal liabilities when you are a sole trader.

For example, let’s say you are the sole proprietor or trader of a small food business in Brisbane. You may have incurred debt that forces you to resort to tax evasion. These fraudulent acts are reasonably easy to track, and the whole legal liability falls on you.

As such, you may want to consider other business structures that can enable you to find trustworthy support for your business.

2. Partnerships

Businesses run by partnerships are defined as a structure with two or more legal bodies who take charge of operations and profit generation. Partnerships mean there are more than one business owner and operator who share in all the profits and losses.

Many entrepreneurs prefer partnerships compared to sole proprietorships because there is a joint venture to share in the burdens of the business. It means that you won’t have to face legal trouble alone and can rely on the professional opinion of your partner.

However, businesses run by partnerships also have their legal downsides. There may be conflicts in asset ownership and debt liabilities due to misunderstandings among bodies involved. For instance, you may lose more of your assets due to legal settlements because you have to share with your partners.

If you are considering partnerships for your business, come to a consensus by establishing legal contracts and agreements to ensure that you can benefit from reasonable terms in case something in your business goes wrong. Consult with a corporate lawyer to ensure that your best interests are protected.

3. Company

Companies are the most complex among the three business structures, and they often have more legal protection in place because there is a regulatory legal body within the business that ensures all owners and operators adhere to their duties and responsibilities.

Companies may also set specific terms that are unique to the business. For instance, there is the possibility that a shareholder owns a part of the business but has no duties and rights as an operator.

The downside to running a company is there are often more costs that you and your other partners or shareholders have to pay. You also have less control over your business, and the regulatory legal body within the company can restrict your sole ownership of certain assets.

As such, make sure that you have proper legal mechanisms set in your business to ensure that everyone in your company has fair privileges and liabilities. Consult further with a corporate lawyer to guarantee the legitimacy and clarity of all set responsibilities and agreements.


There are different kinds of business structures, each with their pros and cons, and you have to be wary of all the legal aspects to ensure that you can avoid or at least be prepared for any liabilities in the future. Remember all the formerly mentioned information and find your ideal business structure today.

GLG Legal can provide you with the best commercial lawyers in Queensland to help understand legalities about business structures. We can also provide you with other corporate and commercial law services that can help you protect your business in case of any legal trouble. Consult with us today to find the best legal solutions.

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