Sole trader: simple but personal
Sole trader setups are often simple and low-cost, which suits many freelancers starting out. Business income is generally reported in the individual return and taxed at personal marginal rates. Money earned is your money and no wages are required to be paid to you.
The trade-off is limited separation between personal and business risk, plus fewer planning options as income grows.
Company: structure and retained profits
A company can create clearer commercial separation and may suit growing studios, agencies, production businesses and consultants building a team. Company tax rates can help with retained earnings, but drawings, wages, PSI, dividends and Division 7A need careful management.
Compliance costs are higher, so the structure should solve a real commercial or tax planning need.
Trust: flexibility with complexity
Trusts can provide flexible distribution planning and are common in family business or investment contexts. They require proper documentation, distribution minutes and advice on beneficiaries, losses and asset protection.
For creative professionals, trusts may be useful in the right circumstances but are rarely a DIY decision.
When to review your structure
It is time to review when income becomes consistent, risk increases, you hire staff, bring in collaborators, buy property, sign larger contracts or start retaining profits. The best time to review is before the next growth step, not after problems appear.
