What Is The Difference Between A Partnership Structure And A Company Structure? (2025 Updated)

So you’re running your own business – great!

Your first step is usually deciding on a business structure. Choosing your business structure is really important, especially as we head into 2025, and will depend on which option best suits your business’ needs.

The structure you choose will affect everything you do – from how you hire employees to your ability to scale as your business grows. With evolving market conditions and updated regulatory requirements in 2025, getting it right from the start is crucial.

So, it’s important to do your homework and set a strong foundation early on.

This article discusses two of the most common business structures – a partnership and a company. But what exactly is the difference between the two?

We know it can be overwhelming to navigate these choices, so we’re here to help simplify the process!

A Partnership Structure

A partnership structure is where multiple people come together to run a business as partners.

How Does A Partnership Structure Work?

Put simply, a partnership does not separate the business from its partners.

This means that if something goes wrong in the course of business, you could be held responsible for your partner’s mistakes.

The pros? Partnerships are generally straightforward to set up and dissolve, with relatively low administration costs. Unlike operating as a sole trader, you can share the workload and management responsibilities with your fellow partners.

On the flip side, because the business isn’t a separate legal entity, partners can be personally liable for each other’s mistakes – a risk that may not suit everyone. Additionally, since it can be challenging to secure significant capital in a partnership, this option might raise red flags for tech startups and other ventures aiming to attract substantial investment.

If you’re thinking about a partnership structure for your business, you should:

• Register your business name (for guidance, check out our step-by-step guide on registering a business name),
• Apply for an Australian Business Number (ABN) and Tax File Number (TFN) for tax purposes, and
• Sign a Partnership Agreement between you and your partner(s).

Note: Partnerships are regulated according to the state or territory in which they operate. For detailed, state‐specific guidelines, visit the Australian Government’s business website.

Many entrepreneurs in 2025 are leveraging digital platforms to manage legal documents and maintain compliance. Regularly reviewing your Partnership Agreement ensures it stays aligned with current legislation and best practices.

A Company Structure

A company structure is where one or more people establish an entirely separate legal entity, with ownership held by shareholders.

How Does A Company Structure Work?

A company exists as its own legal identity, distinct from its founders and owners.

Instead of partners, companies have “shareholders” and “directors”.

Shareholders, the legal owners of the company, appoint directors who oversee day-to-day decisions. (Fun fact: You can be both a shareholder and a director!)

Understanding the differences between shareholders and directors is key. Australia’s corporate regulator, ASIC, offers a detailed explanation here.

There are several types of companies, but the most common are “Proprietary Limited” (private) companies. If your growth plans include eventually raising capital or even listing on the stock exchange, you may want to explore the public company structure – though this option comes with additional regulatory requirements.

Registering your business as a company offers significant protection against risks because the company is a separate legal entity. This means that shareholders enjoy “limited liability” – they are only liable for company debts up to the value of their shares. In other words, shareholders generally cannot be pursued personally for company mistakes.

Moreover, a company structure helps safeguard your business’ most important assets – such as cash and intellectual property – while also making it easier to raise capital. For more details on setting up your company, you might want to read our guide to registering a business name.

Of course, the cons include higher setup and ongoing administration costs. ASIC’s fee structure for company registration has been updated for 2025, so be sure to factor these costs into your budget and review current rates on the ASIC website.

If you think a company structure is right for your business, you should:

• Register an ABN and an Australian Company Number (ACN), along with your TFN for tax purposes, and
• Sign a Shareholders Agreement between you and your shareholders.

Thinking a company structure suits your business but need more advice? We’re here to help – find us here.

A Partnership Structure Vs. A Company Structure

We’ve run you through some of the basics. So, how do you decide what’s right for your business?

Choosing the best structure depends on your individual circumstances. What are the key priorities for your business? How much personal liability are you comfortable with? And what is your capital situation like?

Some entrepreneurs might start out as sole traders because it’s simple, low-maintenance, and inexpensive – ideal if you’re beginning on your own with limited resources. However, as your business grows, many sole traders and partnerships find that converting to a company structure brings added protection and opportunities for growth.

For startups, in particular, a company structure offers more robust protection against risk and disputes – issues that can become especially tricky if co-founders leave or if you’re planning to raise capital. We even recommend our legal guide on business structures for further insights.

Remember – your business structure affects everything, including your tax obligations. It’s always a smart idea to consult with an accountant for tailored tax advice. For additional legal guidance on small business compliance, you might also enjoy reading our piece on how small businesses and startups manage their legals.

Next Steps…

If you’ve decided on your business structure, that’s brilliant news!

Our team at Sprintlaw is ready to help you get all your legal documents in tip-top shape. Get in touch with us here.

Still unsure? We’re here to help answer your questions and guide you through choosing the most appropriate structure for your business.

The Australian Government and our own legal resources provide a wealth of information on partnerships and company structures. You can also check out our legal guide on business structures to dive deeper into the topic.

As we progress through 2025, remember that choosing the right business structure is not just a one-time decision-it lays the foundation for your long-term growth, risk management, and ability to attract investment. Stay informed, regularly review your legal setup, and don’t hesitate to seek professional advice as your business evolves.

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