Every year, thousands of Western Australians take the leap into business ownership. Whether you are opening a cafe in Fremantle, launching a consultancy in Perth’s CBD, or starting a trades operation in the Pilbara, one of the very first decisions you will face is deceptively simple on the surface: should you register a company, or form a partnership?

Get it right and you lay a foundation that supports growth, protects your personal assets, and keeps the tax office happy. Get it wrong and you could spend years untangling legal knots, paying more tax than necessary, or discovering – at the worst possible moment – that your home is on the line for a debt you assumed belonged to the business.

This buyer’s guide is written specifically for people weighing up their options in Western Australia. It walks you through the practical differences between companies and partnerships, the costs involved, the legal obligations each structure carries, and the questions you should be asking before you commit. No jargon without explanation, no vague generalities – just the information you actually need to make a confident decision.

Let’s get into it.

About Business Structures in Western Australia

Before comparing companies and partnerships side by side, it helps to understand what each structure actually is under Australian law and why the distinction matters.

A company is a separate legal entity. Once registered with the Australian Securities and Investments Commission (ASIC), it exists independently of its owners. It can enter contracts, own property, sue and be sued, and incur debts in its own name. The most common type for small and medium businesses in WA is the proprietary limited company (Pty Ltd).

A partnership, by contrast, is not a separate legal entity. It is simply the relationship that exists between two or more people (or entities) who carry on a business together with a view to profit. In Western Australia, partnerships are governed by the Partnership Act 1895 (WA), one of the oldest pieces of commercial legislation still in operation in the state.

There is also the limited partnership, which is less common but worth mentioning. Under the Limited Partnerships Act 1909 (WA), a limited partnership has at least one general partner with unlimited liability and one or more limited partners whose liability is capped at their agreed contribution. This structure is sometimes used for investment ventures but is far less popular than general partnerships or companies for everyday business.

Understanding this foundational difference – separate legal entity versus a relationship between people – is the key to understanding almost every practical distinction that follows.

Why Your Choice of Structure Matters More Than You Think

Choosing a business entity is not just a box-ticking exercise at registration time. Your structure affects how you pay tax, how profits are distributed, what happens if the business is sued, how easy it is to bring in new owners or investors, and what obligations you have to government regulators.

It also affects perception. Lenders, suppliers, and larger clients sometimes view a Pty Ltd company as more established or credible than a partnership, fairly or not. On the other hand, certain professional fields – particularly in law, accounting, and medicine – have traditionally operated as partnerships and continue to do so for regulatory or cultural reasons.

The point is this: your structure is not set in stone forever, but changing it later involves cost, paperwork, potential tax consequences, and disruption. It is far better to think it through properly at the start.

Company vs. Partnership in Western Australia: A Detailed Comparison

Liability and Asset Protection

This is often the single biggest factor for WA business owners, and for good reason.

In a proprietary limited company, the shareholders’ liability is limited to any amount unpaid on their shares. In practice, most small company shares are fully paid at a nominal value (often one dollar per share), meaning the shareholders’ personal assets are generally protected if the company cannot pay its debts. The company itself is responsible for its obligations.

There are important exceptions to this protection. Directors can be held personally liable for insolvent trading under the Corporations Act 2001 (Cth). Personal guarantees – which banks and landlords in WA routinely require from directors of small companies – also punch a hole through the limited liability shield. Still, the baseline protection is significantly stronger than what a partnership offers.

In a general partnership, every partner is jointly and severally liable for the debts and obligations of the partnership. This means that if the business cannot pay a supplier, a landlord, or a legal judgment, the creditors can pursue any one partner for the full amount, regardless of that partner’s ownership share. Your house, your savings, your personal investments – all of it is potentially exposed.

This distinction alone pushes many WA business owners towards the company structure, particularly in industries where the risk of significant liability is high: construction, hospitality, transport, and professional services, to name a few.

Taxation: How Each Structure Is Treated by the ATO

Tax treatment is the second major consideration, and it works quite differently for each structure.

A company pays tax at the company tax rate. For base rate entities (those with aggregated turnover below $50 million), the rate is currently 25 per cent. The company lodges its own tax return, and profits distributed to shareholders as dividends are then taxed in the shareholders’ hands, with franking credits to reduce double taxation.

A partnership does not pay tax itself. Instead, the partnership lodges an information return, and the net income (or loss) flows through to each partner’s individual tax return according to their share. Each partner then pays tax at their personal marginal rate, which in Australia ranges from zero (below the tax-free threshold) to 45 per cent for the highest earners, plus the Medicare levy.

For some business owners, the flow-through nature of partnership taxation is an advantage. If partners are on lower marginal rates, or if the business generates losses in its early years that can offset other personal income, the partnership structure may deliver a better after-tax outcome.

For others, the flat 25 per cent company tax rate is more attractive, especially as profits grow and partners’ marginal rates climb. Companies also offer more flexibility in timing the distribution of profits – you can retain earnings in the company and pay dividends later, which can assist with cash flow management and tax planning.

There is no universally “better” option here. The right answer depends entirely on your specific circumstances, which is why professional tax advice is essential before you commit to a structure. Choosing the right entity between a company and a partnership in WA is ultimately a decision that should be informed by your projected income, your other sources of revenue, and your long-term business plans.

Setup Costs and Ongoing Compliance

Setting up a company in Western Australia involves registering with ASIC, which carries a registration fee. As of 2026, the fee for registering a company is modest (check the ASIC website for current figures, as they update periodically). You will also need to register for an Australian Business Number (ABN) and potentially for GST, PAYG withholding, and other obligations depending on your circumstances.

Ongoing compliance for a company includes lodging annual reviews with ASIC (with an associated annual fee), maintaining statutory registers of members, directors, and share transfers, keeping minutes of meetings, preparing annual financial statements, and lodging an annual company tax return. For proprietary companies, the requirements are lighter than for public companies, but they are still more onerous than what a partnership faces.

A partnership is cheaper and simpler to establish. You register a business name (if trading under one) and obtain an ABN. There is no registration body equivalent to ASIC for partnerships. You should absolutely have a written partnership agreement, but the law does not require you to have one – the Partnership Act 1895 (WA) simply fills in the gaps with default rules, many of which may not suit your situation.

Ongoing compliance for a partnership is lighter: lodging a partnership tax return, maintaining business name registration, and meeting any industry-specific regulatory requirements.

The compliance burden is a real consideration. If you are a sole trader bringing in one partner to share the workload, the simplicity of a partnership may appeal. If you are building something you expect to scale, the structure and governance of a company may be worth the extra administration from day one.

Decision-Making, Management, and Control

In a company, the directors manage the day-to-day operations. Shareholders own the company and vote on major decisions (such as appointing directors or approving significant transactions), but they do not necessarily run the business. In many small WA companies, the directors and shareholders are the same people, which simplifies things considerably. However, the framework is there for separating ownership from management as the business grows.

In a partnership, unless the partnership agreement says otherwise, every partner has an equal right to participate in the management of the business. Decisions on ordinary matters are made by majority, while changes to the nature of the partnership business require unanimity. This can work beautifully when partners are aligned, but it can become a serious problem when they are not.

A well-drafted partnership agreement can address many of these issues by specifying decision-making processes, dispute resolution mechanisms, and the circumstances under which a partner may be expelled. But absent such an agreement, the default rules under the Partnership Act 1895 (WA) apply, and they were not drafted with modern business disputes in mind.

Raising Capital and Bringing in New Owners

If you anticipate needing to raise capital or bring in new business partners down the track, your choice of structure is highly relevant.

A company can issue new shares to incoming investors, which is a relatively straightforward mechanism. Share classes with different rights (voting, dividends, capital returns) offer flexibility. The company structure is also more familiar and comfortable for external investors, venture capital, and lenders.

A partnership does not have shares. Bringing in a new partner means varying the partnership agreement and can trigger issues around the valuation of existing partnership interests, the transfer of assets, and potential tax consequences. Departing partners face similar complexity. It is not impossible, but it is less elegant than the share-based system.

For businesses that plan to stay small and owner-operated, this may not matter. For those with growth ambitions, it is a significant point in the company’s favour.

Succession and Exit Planning

What happens when you want to leave the business, retire, or if something happens to you?

With a company, shares can be transferred, sold, or bequeathed. The company continues to exist regardless of changes in ownership. This makes succession planning more predictable and less disruptive.

With a partnership, the default position under the Partnership Act 1895 (WA) is that the partnership dissolves upon the death or retirement of any partner. A well-drafted partnership agreement can override this, allowing the remaining partners to continue and providing a mechanism for buying out the departing partner’s interest. But without such provisions, the result can be messy and potentially devastating for the business.

Practical Scenarios: Which Entity Suits Which Situation?

Scenario One: Two Tradies Going into Business Together

Matt and Dave are both licensed electricians in Perth. They want to pool resources, share a workshop, and take on bigger jobs. Neither expects to have employees initially. Their projected turnover for year one is $300,000.

A partnership could work well here. The setup is simple and cheap. With turnover split equally, each partner reports $150,000 on their personal tax return. They should absolutely invest in a proper partnership agreement covering profit sharing, capital contributions, dispute resolution, and what happens if one wants to leave.

However, given the liability risks inherent in electrical work, they should seriously consider whether the asset protection of a company structure is worth the extra cost and compliance. If either partner owns a home or has significant personal assets, the answer may well be yes.

Scenario Two: A Tech Startup with Growth Plans

Sarah has developed a software product and wants to bring in a co-founder with complementary skills. They plan to seek investor funding within 18 months.

A company is almost certainly the better choice. Investors expect a corporate structure. Shares can be issued to the co-founder and later to investors with different rights and preferences. Employee share schemes are possible. The intellectual property can be owned by the company, providing cleaner separation from the founders’ personal affairs.

Scenario Three: Professional Practice

Two architects want to open a practice in Subiaco. They value equal decision-making and plan to keep the firm small.

Either structure could work, but a partnership offers simplicity and the flow-through tax treatment that many professional practices prefer. A comprehensive partnership agreement is essential, covering everything from profit distribution to client ownership to what happens with work in progress if a partner leaves.

If you are in Mandurah WA and looking for guidance from a commercial attorney in Mandurah, having a local professional who understands both the legal and commercial landscape of your region can make the process of selecting and establishing your structure significantly smoother.

Key Legal Considerations for WA Business Owners

The Partnership Act 1895 (WA)

Western Australia’s partnership legislation is one of the oldest in the country and has not been substantially amended in decades. It provides a set of default rules that apply in the absence of a written agreement, including equal sharing of profits and losses, equal rights in management, and the requirement of unanimity for introducing new partners or changing the nature of the business.

Many of these defaults are workable, but some can produce surprising results. For example, under the Act, a partner is entitled to be indemnified by the firm for payments made and liabilities incurred in the ordinary course of business. If one partner incurs a substantial debt on behalf of the partnership, the other partners share that obligation whether they knew about it or not.

You can read more about the general legal principles of partnerships on Wikipedia for a broader understanding of how the concept operates across common law jurisdictions.

The Corporations Act 2001 (Cth)

Companies in WA (and across Australia) are governed by Commonwealth legislation, primarily the Corporations Act 2001. This is a substantial piece of law that sets out directors’ duties, reporting requirements, rules around share issues and transfers, and the framework for winding up a company.

Directors’ duties are particularly important. Directors must act in good faith in the best interests of the company, for a proper purpose, with care and diligence, and must not improperly use their position or information. Breach of these duties can result in personal liability, civil penalties, and in serious cases, criminal prosecution.

Business Names and Registration

Regardless of structure, if you carry on business under a name other than your own (for individuals and partnerships) or the company’s registered name (for companies), you must register the business name with ASIC. Business name registration is separate from company registration and ABN registration.

Common Mistakes to Avoid When Selecting a Business Entity in WA

Having walked many business owners through this decision, certain mistakes come up repeatedly.

Choosing based on cost alone. Yes, partnerships are cheaper to set up and run. But if a partnership exposes your personal assets to significant risk, the savings are a false economy. Think about total cost, including the potential cost of things going wrong.

Not getting a written agreement. This applies to both structures but is especially critical for partnerships. A handshake deal between mates works right up until it does not. By then, the absence of a written agreement makes every issue harder and more expensive to resolve.

Ignoring future needs. Your business might be small today, but where do you want it to be in five years? If growth, investment, or an eventual sale are on the cards, choosing a structure that accommodates those goals from the start saves considerable pain later.

Failing to get professional advice. The interplay between business structures, taxation, asset protection, and estate planning is genuinely complex. A few hundred dollars spent on proper legal and accounting advice at the outset can save tens of thousands down the line.

Assuming you cannot change later. You can restructure, but it comes with costs: potential capital gains tax, stamp duty (though this has been abolished in WA for some transactions), new registrations, and administrative effort. Factor this in, but do not let it paralyse you. Starting with an imperfect structure is better than not starting at all.

Steps to Set Up Your Chosen Entity in Western Australia

Setting Up a Company

1. Choose a company name and check availability through ASIC’s registers.
2. Decide on the company’s internal rules (you can adopt replaceable rules under the Corporations Act or draft a custom constitution).
3. Obtain written consents from proposed directors and, if applicable, the company secretary.
4. Register the company with ASIC (online or through an agent).
5. Register for an ABN and any required tax registrations (GST, PAYG).
6. Set up the company’s statutory registers and records.
7. Open a business bank account in the company’s name.

Setting Up a Partnership

1. Choose a business name and check availability.
2. Draft and sign a comprehensive partnership agreement with the help of a qualified professional.
3. Register the business name with ASIC (if applicable).
4. Register for an ABN and a TFN for the partnership.
5. Register for GST if projected turnover exceeds the threshold.
6. Open a business bank account in the partnership’s name.
7. Set up bookkeeping systems that properly track each partner’s drawings, contributions, and entitlements.

Frequently Asked Questions

1. Can I convert a partnership into a company later?

Yes, you can. However, it is not simply a matter of filing a form. Converting a partnership to a company involves registering the new company, transferring assets from the partnership to the company (which may trigger capital gains tax and stamp duty implications), novating contracts, updating registrations, and winding up the partnership. It is doable but involves professional advice and some expense.

2. What happens if my business partner wants to leave a partnership?

If you have a partnership agreement, it should set out the process for a partner’s departure, including how their interest is valued and paid out. If you do not have an agreement, the default position under the Partnership Act 1895 (WA) is that the partnership dissolves, which can be disruptive and costly. This is one of the strongest reasons to have a written agreement in place from the start.

3. Do I need a company secretary for a small Pty Ltd company in WA?

No, a proprietary company is not required to have a company secretary under the Corporations Act. However, it must have at least one director who ordinarily resides in Australia. Many small companies operate with a sole director and no secretary.

4. Is a partnership or a company better for tax purposes?

It depends entirely on your circumstances. A partnership offers flow-through taxation, which can be beneficial if partners are on lower marginal tax rates or the business generates early losses. A company pays a flat 25 per cent tax rate (for base rate entities), which may be advantageous as profits grow. There is no one-size-fits-all answer, and this is an area where professional tax advice is strongly recommended.

5. Are there any business types that must use a particular structure in WA?

Some professions and industries have regulatory requirements that influence or dictate the available structures. For example, certain professional services may have restrictions on incorporation, while some financial services activities require specific licensing that is more readily obtained through a corporate structure. Always check with the relevant industry regulator in Western Australia before finalising your decision.

Final Thoughts

Choosing between a company and a partnership in Western Australia is not a decision to rush, but it is also not one to overthink to the point of inaction. Both structures have genuine strengths, and the right choice depends on your specific situation: your risk profile, your tax position, your growth plans, and how many people are involved.

Take the time to understand the implications of each option. Talk to a qualified accountant about the tax consequences. Speak with a commercial lawyer about liability, agreements, and compliance. And then make a decision and get on with the far more exciting work of building your business.

Western Australia is a state full of opportunity. With the right structure underneath you, you will be well placed to make the most of it.