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Business name, limited company, limited by guarantee or partnership — the real differences in liability, tax and credibility, without the textbook framing.
Arrow-Edge
Professional Services
Most people asking this question have already been told the textbook answer and found it unhelpful, because it compares the structures on dimensions that do not matter to them. Here is the comparison on the dimensions that do.
Business name registration is a register entry, not an entity. You and the business are the same person in law. It is quick, inexpensive, and adequate for a sole trader with no employees and no meaningful contract risk.
Private company limited by shares is a separate legal person. Your liability stops at your unpaid share capital. This is the right answer for the large majority of commercial ventures, and the question is usually when to incorporate rather than whether.
Company limited by guarantee has no share capital and distributes no profit. It is the vehicle for non-profit activity, and it requires the Attorney-General's consent — which adds months, not weeks.
Limited partnership and LLP suit professional practices and joint ventures where partners want pass-through treatment with some liability protection.
With a business name, a judgment against the business is a judgment against you, enforceable against your house and your personal accounts. With a limited company, it is enforceable against the company's assets.
That distinction is worth more than it sounds, and it is worth most precisely when things go badly — which is when you cannot retrospectively incorporate.
The protection is not absolute. It falls away where you have given a personal guarantee, where you have traded while insolvent, and where you have not kept company and personal money apart. The last is the common failure: a company account used as a personal wallet invites a court to treat the separation as fiction.
A business name's profits are taxed as your personal income, at graduated rates to 24 per cent. A company pays companies income tax — 0 per cent below the small company turnover threshold, 20 per cent for medium companies, 30 per cent above.
Below the small company threshold, a company can be the lower-tax option, which surprises people who assume incorporation costs more. Above it, the comparison turns on whether you draw the profit or retain it, and on whether you can take part of your return as salary.
Do the arithmetic on your own numbers. The general answer is not reliable.
This is the dimension clients raise last and feel first. Corporate customers often require an incorporated supplier. Banks lend to companies on terms they will not offer a business name. Investors cannot take equity in a register entry.
If your plans include any of these, incorporate now rather than converting later — conversion means a new entity, new contracts, new bank accounts and, often, a new tax identification number.
For a commercial venture with employees, contracts or growth ambitions: a private company limited by shares. For a one-person service business with modest turnover and little contract exposure: a business name, with incorporation planned for the point where any of liability, lending or corporate customers becomes relevant.
We handle both registrations, and we would rather talk through your particulars than have you pick from a list.
The register is where more audit queries originate than any other schedule. Six checks you can run yourself before we arrive, and why each one matters.
Arrow-Edge · Professional Services
Nine amendments matter in practice. We work through each one, what it does to your effective rate, and the filings that need to change before your next return.
Arrow-Edge · Professional Services
A first conversation costs nothing and commits you to nothing. If we are not the right firm for the matter, we will say so and point you somewhere better.