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It’s normal for your business to change and evolve over time. As your business grows in 2025, these changes could include hiring new employees, acquiring additional assets, making strategic investments, or expanding into emerging markets and digital platforms.
While this can be incredibly exciting, it also means that your business may have outgrown the original governance framework you chose at the start. In today’s dynamic market, that structure might no longer address the complexities and opportunities that come with growth.
So, at what point should you consider changing your business structure?
A common evolution for growing businesses is transitioning from a sole trader model to a company structure. In 2025, many entrepreneurs find that incorporating offers valuable benefits, such as limited liability, which can help safeguard your personal assets as you take on more investments and assets.
If you decide to make the switch, you’ll need to consider new legal duties as a company director, complete annual ASIC reviews online, and maintain detailed digital financial records. Additionally, you will need to register your company with ASIC and efficiently transfer your intellectual property and contracts to the new corporate entity. We’ll take you through these steps below!
Costs And Liabilities: Is The Company Structure Right For Me?
Limited Liability vs Unlimited Liability
While a company can be more expensive and complex to maintain than a sole trader structure, its status as a separate legal entity means that you generally enjoy limited liability. This typically protects your personal assets from the company’s debts.
Many start as sole traders because it’s simple and cost-effective to set up when launching a new venture. However, as a sole trader, you hold unlimited liability, meaning you are personally responsible for any business debts or losses.
It’s important to note that there are instances where personal liability may still arise. For example, when seeking a business loan, financiers often require a director’s guarantee. Should your company struggle to repay the loan, your personal guarantee may make you liable for the debts. Directors must also be mindful of insolvent trading – you have a statutory duty to ensure your company does not continue trading when it is unable to meet its debts as they fall due.
Costs and Record Keeping
Companies can be more costly and administratively complex than sole traders. You’ll incur higher registration fees for setting up your company and business name, as well as increased accounting and administrative expenditures.
In contrast, operating as a sole trader involves considerably less paperwork and lower costs. For example, obtaining an ABN is free, allowing you to start trading immediately, and you simply pay tax on your business income through your personal tax return.
Ultimately, if your business is expanding, taking on greater investments, and assuming higher risks, switching to a company structure can be a prudent move to protect your personal assets. However, it’s crucial to weigh this against the increased costs and administrative responsibilities. In some cases, maintaining a sole trader status may still be the best route if your operations remain relatively simple.
You can also find out more information about the pros and cons of these different business structures here.
What Are My Ongoing Duties And Responsibilities In Running A Company?
If you decide to transition to a company structure, you’ll face a range of new responsibilities and regulatory obligations that are designed to protect both your business and its stakeholders in 2025.
Director’s Duties
As a company director, it is essential to understand and comply with your duties as outlined in the Corporations Act 2001. Staying up-to-date with any amendments-especially as regulatory requirements evolve in 2025-is crucial.
There are four general director’s duties:
- To act with due care and diligence;
- To exercise your powers and duties in good faith in the company’s best interests and for a proper purpose;
- To not improperly use your position for your own advantage or to the company’s detriment;
- To not improperly use information obtained through your position for your own advantage or to the company’s detriment.
In addition to these core duties, you also have obligations such as preventing insolvent trading, maintaining accurate financial records, and lodging timely reports with ASIC. Failure to comply can result in significant civil or criminal penalties; read more about this here.
ASIC Annual Company Review
To keep your company registered in 2025, you must complete an annual review through ASIC’s online portal. This review is essentially an assessment of your company’s solvency and ongoing capacity to meet its debts.
We’ve detailed the ASIC Annual Review: How To Prepare And Complete It for you. In short, you will need to submit an annual statement and pay the updated fee, ensuring that your company’s financial details are current and compliant.
Financial Record Keeping
All companies are required to maintain financial records in written or electronic form. These records, including invoices, receipts, cheques, and supporting documents, are vital for tracking your company’s financial performance.
For compliance, company financial records must be kept for at least 7 years, and tax records for a minimum of 5 years. This may include profit and loss statements, balance sheets, depreciation schedules, and tax returns. Ensuring robust record keeping is essential in 2025, especially with increased digital reporting requirements.
4 Key Steps In Restructuring Your Business
- Register Your Business
You can register your business using the Business Registration Service. This process will help you acquire an ABN, ACN, and secure your company name. Remember that an ACN is a unique 9-digit identifier allocated solely to companies.
All businesses require an ABN, a unique 11-digit number used to identify your enterprise for taxation and commercial transactions. It’s important to note that you cannot transfer your existing ABN from your sole trader operation-most changes in structure will necessitate applying for a new ABN and cancelling the old one, along with resetting your GST and PAYG registrations.
- Transfer Your Business Name
You will need to apply with ASIC to transfer your business name if you wish to continue using the same name after restructuring. This two-step process involves submitting a transfer request, after which ASIC will cancel the old registration within 28 days, allowing you to register the name under your new company.
- Transfer Your Intellectual Property and Assets
It’s crucial that the new company owns all intellectual property rights, including trade marks and patents, to facilitate commercial transactions and attract investors. If you’ve been operating as a sole trader, you likely own these rights personally. In this case, consider executing an IP Assignment Agreement to formally assign your IP to the company. Additionally, if you have collaborated with other business partners, ensure they also sign the necessary assignment agreements. For further guidance on safeguarding your brand, read our insights on transferring trade marks.
- Transfer Contracts, Licences, Assets and Records To Your New ABN/ACN
Ensure that all vital documents-including leases, permits, licences, and key business records (customer, employee, and financial data)-are transferred to the new company under its ABN/ACN. It’s wise to have a legal expert review these changes; you can explore our contract review services for further support.
In addition to these key steps, it’s prudent to consult with a legal expert for a comprehensive review of your business’s unique circumstances. With continual changes in digital compliance and corporate governance requirements in 2025, ensuring all your legal bases are covered can save you significant stress and financial liability down the road. Our team at Sprintlaw is here to help you navigate these complexities with expert advice and tailored solutions.
Need Help?
We understand that taking your business to the next level can feel both exhilarating and daunting. With evolving legal responsibilities and increased administrative demands in 2025, recognising when to restructure is more important than ever.
If you have more questions about restructuring your business, reach out to us at team@sprintlaw.com.au or call us on 1800 730 617 for a free, no obligation chat. We’re also happy to provide guidance on related areas such as employment law, intellectual property, and capital raising so you can confidently move forward.
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