INSIGHTS: Choosing the right business structure

February 21, 2017

Whether you are entering into an existing professional health practice or other business, intending to set up a new structure or restructuring an existing practice or other business there are a range of legal structures that may apply in your circumstances.

Different legal risks and liabilities associated with each business structure may apply:

Sole Trader

  • Appropriate for sole owners who intend to control and manage the business on their own
  • Simple and may be relatively cost efficient
  • A sole owner can retain all profits but has unlimited legal liability for all debts and liabilities of the business
  • Personal assets may be used to pay off debts of the business
  • Sole traders should consider and assess asset protection strategies


  • Appropriate if there are two or more partners who wish to jointly hold ownership of the business
  • A written partnership agreement should address how profits are to be distributed, the share or proportion of ownership of each partner, dispute resolution and transfer of ownership if ¬†one partner exits
  • Upon the exit of a partner, the partnership structure may need to change or even be dissolved depending on the terms of the partnership agreement
  • Each partner is personally liable for their own acts and may be personally liable for the acts of other partners


  • Appropriate for a group of health practitioners wishing to carry on separate practices as associates while splitting the business expenses
  • Associates will share the costs of running a practice however do not share any income, profits or losses which each associate may individually generate
  • Unlike a partnership, each associate is not personally liable for acts of another associate

Proprietary Company

  • Appropriate for setting up a practice with a separate legal entity responsible for liabilities of the business that is separate to its owners or shareholders
  • Must comply with the Corporations Act including governance and reporting requirements which may lead to higher compliance costs
  • A company must have at least one director and one shareholder (who can be the director) and up to 50 shareholders
  • Liability of owners/shareholders is limited to share capital subscribed
  • A company structure can provide asset protection not otherwise available under a partnership
  • The company structure continues if a practitioner/shareholder leaves or joins the practice
  • Profits can be distributed by way of dividends to owners/shareholders
  • A company structure may be more attractive to prospective purchasers


  • Appropriate where a person or a company wishes to carry on the business and hold assets acting as trustee for the benefit of the beneficiaries
  • A trust can be structured as a service entity to employ administrative staff, purchase equipment and lease premises
  • All income is accumulated in the trust and the trustee has the power and discretion to distribute the income to the beneficiaries
  • Ownership of the business by a trustee may provide an asset protection strategy
  • A trust structure may be complex and the establishment and ongoing management of a trust may be expensive

Checklist of factors to consider for each structure:

  • Set up costs and ongoing regulatory costs
  • Retirement and exit strategies
  • Corporate structure and associated risks and liabilities
  • Regulatory and reporting requirements
  • Management control, participation and ownership
  • Asset protection

We can help

Our corporate advisory and commercial team can advise you on a business structure for your business and prepare necessary documentation including:

  • Business Sale and Purchase agreements
  • Dividend and distribution policies
  • Associateship, Partnership and Shareholder agreements
  • Company Constitution
  • Protection of patient and business data ownership
  • Funding and loan agreements
  • Compliance and regulatory consideration such as employment, data security and privacy
  • Employment contracts
  • Board governance issues

If you would like more information about business structures please contact Principals Mark Fitzgerald (Melbourne) or Georgina Odell (Sydney).

Disclaimer: This information is current as of February 2017. This article does not constitute legal advice and does not give rise to any solicitor/client relationship between Meridian Lawyers and the reader. Professional legal advice should be sought before acting or relying upon the content of this article.