Changing your business structure in Australia

Your business is growing. That’s something to celebrate. But as things expand, you might start wondering whether your current structure can keep up. Should you stay a sole trader, or is it time to register as a company?

We’ve broken down what changing your business structure means, when it might make sense to do it, and how to make the switch smoothly.

Why change your business structure?

Growth brings new opportunities and responsibilities, which might make a company structure a better fit than a sole trader structure.

One major reason for switching is risk. As a sole trader, you’re personally responsible for any debts or legal issue[DT1] s. That means if something goes wrong, your personal assets like your home or savings could be at risk. A company structure separates your personal and business finances, offering limited liability protection that helps keep your assets safe[DT2] .

There’s also the question of tax. As a sole trader, your profits are taxed at individual income rates, which can increase as your earnings grow. Companies, on the other hand, pay a flat 25% corporate tax rate for businesses with turnover below $50 million. This can make managing finances and planning for future growth easier.

How to transition from sole trader to company

1. Choose your company structure type

The first step is deciding what kind of company structure best fits your business. You might want to consider choosing a proprietary limited company (Pty Ltd) if you want limited liability but still maintain control. It’s a flexible option that allows you to expand later by bringing in investors or additional shareholders if your business continues to grow.

2. Register your company

Once you’ve decided on your structure, it’s time to make it official. You’ll need to register your company with the Australian Securities and Investments Commission (ASIC). During this process, you’ll:

• Register your company name through ASIC.
• Apply for a new ABN and TFN (your sole trader details can’t be transferred).
• Transfer or register your business name if you want to keep your existing brand.
• Update your contact details with any suppliers, clients, and government agencies.

3. Appoint directors and allocate shares

Directors are responsible for managing the company’s operations and ensuring it meets its legal obligations, while shareholders own the business through the shares they hold.

At this stage, you’ll decide who will fill these roles and how many shares each person will own. If you plan to bring in partners or investors later, you might want to set up a shareholder agreement early on.

4. Open a company bank account

Once your company is registered, it’s time to separate your finances. You’ll need to open a new bank account under the company name. A separate account helps keep business transactions clear for tax reporting, simplifies bookkeeping, and builds credibility with clients and suppliers.

5. Transfer assets and contracts

Next, you’ll need to move everything your sole trader business owns into the company. That might include equipment, vehicles, intellectual property, or domain names. For registered assets like trademarks or business names, you’ll need to update ownership details through ASIC or IP Australia.

Don’t forget your contracts. Agreements with clients, suppliers, and staff will need to be updated or replaced so they reflect the company as the contracting party. This ensures you’re trading legally under the new structure and that all parties are clear on who they’re dealing with.

6. Understand tax obligations

Unlike a sole trader, a company is a separate legal entity with its own tax obligations. You’ll need to register for corporate tax and possibly GST if your annual turnover exceeds $75,000. If you employ staff, you must also set up PAYG withholding.

A qualified tax professional can help you understand how these changes affect your business and identify any available rollover reliefs or deductions during the transition. They can also help ensure your company’s financial setup complies with ATO requirements right from the start.

7. Notify stakeholders

Once the transition is complete, spread the word. Send updates to clients, suppliers, and partners about your new structure and ABN. Update invoices, quotes, and contracts to reflect your company name, and check that your website, business cards, and email signatures are all current.

Clear communication helps build confidence, while avoiding payment delays or confusion when your new company details start appearing on contracts and invoices.

8. Stay compliant with ASIC and ATO

Once your company is up and running, you’ll have ongoing compliance responsibilities. Companies must lodge annual returns with ASIC, keep accurate financial records, and notify ASIC of any changes to company details. You’ll also need to meet ATO reporting obligations, including regular Business Activity Statements (BAS) and tax filings. Staying organised helps prevent unnecessary penalties and keeps your company in good standing.

Remember to keep your business insurance up to date

When your business structure changes, your insurance should too. The policies that protected you as a sole trader won’t automatically carry over to your new company. That means you’ll need to review your existing policies and make sure your new business is properly covered.

Here are a few policies to check:

• Public Liability insurance: As a company, you may need to increase your coverage to reflect greater operations and risk exposure.
• Professional Indemnity insurance: Updating your policy ensures your company is covered for potential claims involving professional errors or negligence.
• Workers’ Compensation insurance: If you’re hiring staff, this cover is mandatory to protect employees against work-related injuries or illnesses.
• Business insurance: Your company may need broader protection for new equipment, assets, or services added as part of your expansion.

Insurance gives you peace of mind while your business grows. If you’re unsure what you need under your new structure, BizCover makes it easy to compare policies, update your details, and find the right protection for your business, in minutes.

Build your next chapter with confidence

Transitioning from a sole trader to a company marks an exciting new phase for your business. It means bigger goals, more responsibility, and greater potential. While there’s paperwork and planning involved, the rewards make the effort worthwhile.

As you take this next step, remember that strong protection is part of smart growth. Reviewing your insurance now ensures your new company is set up for success from day one. With BizCover, you can easily review your business insurance online and find cover that supports your next stage of growth, without the drama or the fuss.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the Product Disclosure Statement or policy wording. Target Market Determination can also be found on our website as well. © 2025 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769