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Sole Trader to a Partnership: Changing your Business Structure

Sole Trader to a Partnership: Changing your Business Structure

Expanding your business? Find out here how to change your business from a sole trader to a partnership.

15th March 2019

As your business expands, you may consider changing your business structure from a sole trader to a partnership. A partnership can help you manage your expanding business structure and bring added expertise into the running of your company. Read on to help you transition from a sole trader to a partnership smoothly and legally.

What is the difference?

Firstly, it is important to note that both sole traders and partnerships have unlimited liability unlike companies. Also, when you are registered as a company as opposed to a partnership or sole trader,you are accountable to ASIC as opposed to just the ATO for partnerships and sole traders. This means that even when you are a partnership you will be personally responsible for the obligations of your business, subject to the partnership agreement. Partnerships means that the business is owned by all partners rather than an individual under a sole trader model. Finally, partnerships can survive the death of a partner, subject to the agreement, where as sole traders cease to exist on the passing of the owner.

Why would I change?

There are many reasons that you may wish to change your business structure. Perhaps you want to bring someone on to help run the business, and want to be a partnership to better reflect your circumstances. This is particularly the case if you have an equity investor who desires some degree of control in your business. Alternatively, your business could be going through substantial growth and a partnership is a better way to distribute liability. Another reason is that you may wish to restructure your business.

What should you check for in a new partner?

This represents a big step for you to change your business structure. You have spent time and effort in building your business, so it may be difficult to get used to another person making decisions for your business. Therefore make sure you have a good conversation with the person you are considering going into partnership with. See what their vision and expectations for the business are, to ensure you both are on the same page. It is worth taking your time in deciding a new partner as you will be working together extensively in the future. Click here for tips on how to negotiate a partnership agreement.

What do I need to do?

To change your business structure, you need to apply for a new ABN. You will need to have the required documents, similar to if your business was a partnership from the outset. It is also a good idea to prepare a written agreement in how your partnership will run. This will help mitigate and resolve potential issues that you will encounter in running your business.


Therefore it is important you take your time in changing from a sole trader structure to a partnership. Better still, get in touch with a lawyer who can help you comply with relevant legal requirements.

Need help in changing your business structure? Contact a LawPath consultant on 1800 529 728 to learn more about what business structure is right for you, customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Lachlan Ward

Lachlan is an intern at Lawpath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.