The business structure you chose when you started may no longer be the right one for your business today.
As your business grows, you may take on employees, purchase assets, introduce new owners or prepare for retirement. Each change can affect your tax obligations, legal responsibilities and exposure to financial risk.
Restructuring may help you manage those changes. It can also create unexpected costs if you transfer assets or change ownership without planning first.
So when should you review your business structure, and what should you consider before making a change?
What does restructuring a business mean?
Business restructuring involves changing how your business is owned, operated or organised.
This may involve moving from a sole trader arrangement to a company, changing a partnership, introducing a trust or separating business activities into different entities.
Not every restructure requires a new legal entity. Some businesses need changes to ownership, governance or internal operations instead.
The right approach depends on what you want to achieve and whether the benefits justify the costs and obligations.
Six signs it may be time to restructure
1. Your business has grown beyond its original structure
A sole trader structure can suit a business when one person owns and operates it. It is relatively simple to establish and manage.
As revenue, staffing and contractual commitments increase, the owner's personal exposure to business liabilities may become a greater concern.
A company is a separate legal entity. That distinction can provide a degree of separation between company liabilities and shareholders' personal assets.
Company directors can still face personal liability in certain circumstances, including breaches of their duties and particular unpaid tax obligations.
A growing electrical contracting business
You started as a sole trader and now employ six people. Your business has larger contracts, vehicles and equipment.
Moving operations to a company may be worth considering because your business now has more contractual obligations and operating risk.
Before transferring equipment, contracts or goodwill, you need to consider tax, financing, insurance and legal consequences.
2. You want to separate business and personal risk
The way assets are owned can affect what may be exposed if a business encounters financial difficulties.
For example, holding valuable premises in the same entity as a higher-risk trading operation may warrant review.
Some business owners consider separate ownership and operating entities. This can involve companies or trusts, depending on the circumstances.
A structure cannot remove every risk. Personal guarantees, director obligations, existing creditors and insolvency rules must still be considered.
3. You are bringing in a business partner or investor
A change in ownership often requires a review of the existing structure.
You may need to decide how new owners contribute capital, receive profits, vote on decisions and eventually exit.
A company can issue shares, while a partnership or trust involves different ownership and entitlement rules.
Shareholder agreements, partnership agreements and trust deeds should reflect the intended arrangements.
The tax consequences of admitting a new owner should be assessed before any interests are transferred.
4. Your tax position has changed
Business structures are taxed differently. Sole traders generally include business income in their individual tax returns. Companies are separate taxpayers.
Trust taxation depends on the trust type, beneficiary entitlements and applicable tax rules.
A different structure may suit the way your business earns, retains or distributes income. That does not mean restructuring automatically reduces your overall tax.
The tax treatment of salary, dividends, distributions and funds retained in the business must be considered.
If your business operates through a discretionary trust, read RJS's analysis of proposed discretionary trust tax changes when reviewing future arrangements.
5. You are planning succession or retirement
Ownership arrangements that work while you actively manage the business may not suit your eventual retirement.
You may want family members to take over, key employees to purchase an interest or an external buyer to acquire the business.
The existing structure can affect how ownership is transferred, the documents required and the tax consequences.
Succession planning should also consider business valuation, funding arrangements and the role you intend to retain.
6. You are preparing to sell your business
A potential sale is a reason to review your structure, but the timing matters.
Buyers may prefer to acquire business assets rather than shares or units in an entity. Each transaction can produce different tax and legal outcomes.
Changing the structure immediately before a sale can also affect eligibility for tax concessions.
A business owner should examine the proposed sale, asset ownership and available concessions before transferring anything.
Which business structure might suit your next stage?
There is no single structure that suits every business. The following comparison highlights common differences.
| Structure | Potential advantages | Key considerations |
|---|---|---|
| Sole trader | Simple ownership and administration. Direct control of the business. | Owner is personally responsible for business debts and obligations. |
| Partnership | Shared ownership, resources and decision-making. | Partner liability, agreements and exit arrangements need attention. |
| Company | Separate legal entity. Can issue shares and retain profits. | Director duties, company reporting, setup and ongoing costs. |
| Trust | May provide flexibility in holding assets and, for some trusts, distributing income. | Trust deed, trustee responsibilities, beneficiary taxation and compliance. |
The Australian Government's business structure guide provides a broader comparison of these options.
What tax costs can arise when restructuring?
One of the biggest mistakes is assuming that transferring business assets between related entities has no tax consequences.
A restructure may involve transferring equipment, trading stock, goodwill, property or intellectual property.
Depending on the transaction, you may need to consider:
- Capital gains tax on transferred CGT assets.
- Income tax consequences for trading stock and revenue assets.
- Balancing adjustments for depreciating assets.
- GST treatment, including whether a going concern exemption applies.
- State or territory duties on certain transfers.
- Financing, legal, valuation and registration costs.
- Effects on tax losses and existing tax concessions.
Related-party transfers can still be subject to market value rules. Moving an asset for a nominal amount does not necessarily prevent a tax liability.
Transferring business goodwill
You operate a successful business as a sole trader and want to move it into a company you own.
The business has developed goodwill with a market value of $300,000.
Even if you do not receive $300,000 in cash, transferring the goodwill may have CGT consequences under the applicable rules.
Eligible roll-over relief may defer certain tax consequences, but the conditions must be checked before the transfer occurs.
Can the small business restructure roll-over help?
Australia's small business restructure roll-over rules may allow eligible businesses to transfer certain active assets between entities without an immediate income tax consequence from the transfer.
The rules are designed for genuine restructures of ongoing businesses. They are not a general exemption for selling or transferring assets.
Key eligibility considerations include:
- The relevant small business eligibility requirements, including an aggregated turnover threshold generally below $10 million.
- Whether the assets being transferred qualify as active assets.
- Whether the transaction forms part of a genuine restructure of an ongoing business.
- Whether ultimate economic ownership is maintained, subject to specific legislative rules.
- Residency requirements and the necessary roll-over choices.
A three-year safe harbour may help establish that a restructure is genuine where its conditions are met. It is not a general requirement that every qualifying restructure must remain unchanged for three years.
The roll-over does not automatically remove GST, duty or other transaction costs.
See the ATO's small business restructure roll-over ruling for the detailed conditions.
What does a business restructure process look like?
Identify whether the priority is growth, ownership, risk, succession or a future sale.
Map owners, entities, assets, liabilities, agreements and tax positions.
Assess tax, asset ownership, control, reporting obligations and ongoing costs.
Consider CGT, GST, duty, financing, concessions and contract requirements.
Obtain required advice, complete transfers, update registrations and retain records.
Common restructuring mistakes to avoid
Choosing a structure only for its tax rate
The overall result depends on how profits are earned, retained and ultimately paid to owners.
Moving assets without valuations
Market value rules can apply even where the parties are related.
Assuming a company removes all personal risk
Directors' duties, guarantees and certain tax obligations may create personal exposure.
Ignoring future ownership changes
A structure that suits current owners may create problems when a new investor joins or an owner retires.
Overlooking existing contracts
Leases, loans, supplier agreements and licences may require consent or replacement.
Leaving the review until a sale
Last-minute changes may limit available options and create additional costs.
Business restructuring checklist
Before making a change, work through the following questions.
- What business problem are you trying to solve?
- Who currently owns each business asset?
- Which assets, liabilities and contracts would transfer?
- Would the change create CGT, GST or duty consequences?
- Could an eligible tax roll-over apply?
- Would ownership or control change?
- Are there existing personal guarantees?
- How would profits reach the owners?
- What are the setup and ongoing compliance costs?
- Does the structure support your eventual exit or succession plan?
Frequently asked questions
When should I change from a sole trader to a company?
Consider reviewing your structure when the business grows, takes on more employees or contracts, requires investment or faces greater commercial risk. A company may suit some businesses, but its extra obligations and transfer costs matter.
Does restructuring my business trigger capital gains tax?
It can. Transferring business assets may trigger CGT or other income tax consequences. Eligible roll-over provisions may defer some tax, depending on the transaction and the relevant conditions.
Can I transfer my existing ABN to a new company?
No. A company is a separate legal entity and generally requires its own ABN. You must also review existing registrations, contracts, licences and reporting obligations.
Is a company always better than a trust?
No. Companies and trusts have different ownership, control, taxation and reporting rules. The appropriate structure depends on your business activities, asset ownership and future plans.
Can I restructure just before selling my business?
A restructure before sale may be possible, but it needs careful review. Some roll-over provisions and small business CGT concessions have conditions that may be affected by the proposed transaction.
Does the small business restructure roll-over remove all taxes?
No. The roll-over can defer certain income tax consequences for eligible asset transfers. It does not automatically exempt the transaction from GST, state duties or other costs.
Do I need legal advice as well as accounting advice?
Many restructures require both. An accountant can assess financial and tax implications, while a solicitor can advise on ownership documents, contracts, duties and legal obligations.
Related RJS articles
Review your structure before your next major business decision
You do not need to wait until your business is experiencing problems to review its structure.
Taking on a new owner, purchasing a major asset, expanding operations or planning your exit can each justify a fresh assessment.
The aim is to understand whether your current structure still supports your business objectives, and what changing it would cost.
A review before committing to a transaction gives you more opportunity to compare the available options.
Is your business structure still right for you?
Your RJS accountant can review your current structure, discuss your business plans and help assess the tax and financial implications of restructuring.
Speak to an RJS AccountantSources and further reading
Australian Government: Change Your Business Structure
Australian Government: Choose Your Business Structure
Australian Government: Change Your Sole Trader Business to a Company
Australian Taxation Office: LCR 2016/3, Small Business Restructure Roll-over
Australian Taxation Office: Small Business Restructure Roll-over Eligibility
Related RJS reading: ATO Tax Debt: What to Do When Your Business Owes Tax
Information current as at October 2026.
This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional adviser.
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