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As of 2025, there are now more than 2.6 million active businesses in the Australian economy. Many of these businesses are classified as a small business, which continues to be the backbone of our economic and community growth.
Small businesses remain a substantial contributor to the Australian economy and provide vital employment opportunities across the nation.
So, what really is a small business?
In this article, we’ll break this down and update you on the key definitions and legal considerations for 2025.
Small Businesses And Startups
Globally recognised companies such as Facebook, Airbnb and Lyft all began their journeys as small startups, proving that innovation can emerge from even the smallest ventures. In today’s fast‐paced market, new startups continually disrupt traditional industries, while many small businesses focus on steady, sustainable growth.
Often, small businesses and startups are conflated, yet they have distinct priorities. Startups typically pursue rapid expansion and market disruption, often seeking investment from venture capital or angel investors. In contrast, small businesses concentrate on resilience, local community impact, and long‐term stability. For further insights on business structure, you might also check our guide on operating as a sole trader.
Startups are geared towards quick, large-scale growth and are often prepared to pivot rapidly. This aggressive growth model means they frequently look to external investors for financial backing—a strategy detailed further in our piece on funding your business. Meanwhile, small businesses tend to embrace cautious, incremental expansion strategies that prioritise consistency over explosive growth.
In 2025, while both models support innovation and economic development, the demands and risks they encounter can be very different.
What Is The Definition Of A Small Business In Australia?
In Australia, there isn’t a single definition of a small business; rather, several government agencies and industry bodies use different criteria. Generally, you can consider your venture to be a small business if you meet one or more of the criteria below:
- The Australian Bureau of Statistics (ABS) defines a small business as an organisation that employs fewer than 20 people.
- According to the Australian Securities and Investments Commission (ASIC), a small company has an annual turnover of less than $25 million, no more than 50 employees, and holds assets under $12.5 million.
- The Australian Taxation Office (ATO) considers a business with an annual turnover of less than $10 million to be small.
How Many Employees In A Small Business Australia
As highlighted above, whether a business qualifies as ‘small’ is primarily determined by its annual earnings and the number of employees. Generally, if your business operates as a company, it should have fewer than 50 employees to be considered small. For other business types, the ABS standard of under 20 employees applies.
How To Start A Small Business In Australia
Starting a small business in Australia is an exciting opportunity—whether you’re driven by a passion project or looking to build a steady source of income. In 2025, the digital transformation of business means that establishing a robust online presence alongside a sound legal foundation is more important than ever.
Your initial steps are crucial as they lay down the foundation for your future success. Begin with a comprehensive Business Plan that outlines your goals, required resources, and timelines. For additional guidance on choosing the right business structure, refer to this comprehensive comparison.
After registering your business via ASIC, it’s essential to secure all the necessary legal documents to ensure your business remains protected and compliant. Moreover, consider exploring our services for company registration and legal compliance as part of your start-up checklist.
Key Legal Documents For A Small Business
Having robust legal documents in place ensures smooth business operations, sets clear expectations, and helps you meet your legal obligations. Here are some key contracts and agreements to consider:
Employment Agreements
When hiring staff, a detailed Employment Agreement is vital. This document clarifies job roles, pay rates, working hours, leave entitlements, termination procedures, confidentiality clauses, and dispute resolution processes. It not only safeguards your business interests but also ensures that both parties have a clear understanding of their rights and responsibilities.
Supply Agreements
Supply Agreements are essential when entering into contracts with suppliers. These documents outline product specifications, delivery schedules, payment terms, and warranties. To avoid potential disputes, we highly discourage relying solely on verbal agreements. A written contract provides a clear framework for resolving issues and is especially important when dealing with overseas suppliers, as it needs to be internationally enforceable.
Non-Disclosure Agreements
Protect your sensitive business information by having partners, employees, or potential investors sign a Non-Disclosure Agreement (NDA). This document is particularly useful for safeguarding trade secrets, proprietary information, or unique business ideas, ensuring that your confidential data remains secure during negotiations or partnerships.
Additionally, if you require further contracts reviewed or drafted, our experts offer a Contract Review and Redraft service to help you keep your documents up-to-date and legally sound.
Starting An Online Small Business
Today, establishing an online presence is vital. A professionally designed website or active social media pages not only boost your visibility but also serve as key marketing tools. However, with this digital presence come additional risks and legal obligations.
It’s highly recommended to have clear Website Terms and Conditions in place. These T&Cs help manage user behaviour on your site, reduce your liability, and set out the rules for engaging with your digital content.
As online commerce continues to evolve in 2025, ensuring your website is compliant with data protection and privacy laws is crucial—something we detail in our Privacy Policy guidelines.
Privacy Obligations For Small Businesses
When your business is online, privacy obligations are paramount. Under the Australian Privacy Principles (APPs) and the updated Privacy Act 1988, any business that collects personal information must have a Privacy Policy in place.
Even if you are only collecting email addresses for newsletters, you must inform your users about the data you collect, how it is used, and how you protect it. This transparency builds trust and ensures you comply with the latest legal standards in 2025.
How Small Businesses Get Funding
There are numerous avenues for funding your small business today. Options include:
- Bank or personal loans
- Using your own savings
- Crowdfunding platforms
- Private investors or venture capital
- Government grants and support programs
Each funding option has its own set of risks and benefits. We recommend drafting a detailed business plan and budgeting carefully to ensure you’re prepared for any unexpected costs.
Tax Obligations For Small Businesses
As a small business owner, managing your tax obligations is critical. In Australia, if your annual turnover exceeds $75,000, you are required to register for and pay Goods and Services Tax (GST). Additional tax responsibilities will depend on your business structure and operations. For an updated overview of business tax obligations in 2025, visit the ATO’s official guide.
Registration for taxes typically occurs concurrently when you register your business, though it can also be done separately if needed.
What Small Businesses Need To Know About ASIC
The Australian Securities and Investments Commission (ASIC) remains the key regulatory body overseeing financial services and company operations. When registering your business, particularly if you opt for a company structure, you will regularly interact with ASIC for your registration, reporting, and auditing obligations.
Keeping up with ASIC’s requirements is essential to maintain legal compliance and avoid any fines or penalties. For more details on company compliance, our company registration service provides expert support.
Key Takeaways
Small businesses in Australia are primarily defined by their annual turnover and employee count, although the slight variations depend on the criteria set by agencies like ABS, ASIC, and ATO. Whether you’re starting a stable local enterprise or a rapidly scaling startup, ensuring you have all your legal documents in place is crucial.
To summarise what we’ve discussed:
- A small business is typically defined by its limited employee numbers and turnover, with thresholds varying by regulatory body.
- Small businesses and startups have very different growth strategies and funding approaches.
- Ensuring you have all the right legal documents—from Employment and Supply Agreements to NDAs—is essential for smooth operations.
- Online businesses need additional safeguards, such as Website Terms and Conditions, to mitigate digital risks.
- Adhering to privacy obligations as per the APPs and Privacy Act is crucial when collecting personal data.
- Careful planning of funding sources and tax obligations can help future-proof your business.
- Maintaining compliance with ASIC guidelines is key to avoiding regulatory issues.
Need A Small Business Lawyer?
When you’re looking for legal expertise specific to small businesses, it helps to have professionals who truly understand your unique challenges and needs. Our expert team at Sprintlaw works daily with small business owners and startups, providing tailored legal advice and drafting services for a wide range of contracts—from employment agreements to complex supply contracts.
For a free, no-obligations consultation regarding your small business legal needs, call us on 1800 730 617 or email team@sprintlaw.com.au today. Let us help you set a solid legal foundation for your business success in 2025 and beyond.
Additionally, if you’re planning to evolve your business structure or need advice on managing emerging compliance issues, check out our resources on changing business structures and other expert legal guides on our site.
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