In Australia, general practices are owned and managed under different business structures, and all are regulated and monitored by federal and state legislation and authorities.
Each business structure has different obligations, advantages and drawbacks, along with different risk profiles, tax implications and levels of complexity.
The most common business ownership structures are explained below. If you’re not sure which one is best for you, use the Australian Business Registration Service’s online tool to help you decide, and seek advice from an accountant or other business specialist.
Operating as a sole trader is the simplest business structure in Australia. As a sole trader, you have full control of the business, and are legally responsible for the business in its entirety, including any debts and losses.
A partnership is owned by 2-20 people who share the income, losses and control. Although a written partnership agreement is not legally required to operate a partnership, it is highly recommended. The agreement should specify how income and losses will be distributed, as well as the process for and consequences of dissolving the partnership. Use a lawyer to create an agreement that it is both fair and legally binding.
Partnerships are governed by the state or territory in which the partnership operates.
Companies are considered to be separate legal entities and as such can be “treated as a natural person”, which means they can own assets, incur debt, sue, and be sued.
The owners of a company are shareholders, and the business is managed by one or more directors who are appointed by the shareholders. Under this structure, owners are generally personally exempt from company debt and personal liability, and all moneys earnt belong to the company (not the individual owners).
General practice companies (also known as corporates) often own multiple practices.
Many medical practices use this structure in which the doctors form a professional firm (often a company) and use a service entity (often a trust) to provide the non-medical services to support the provision of medical services to patients.
The service entity (or trust) employs staff, provides the general management and operation of the practice, and takes care of the practice’s facility (including the power, telephone, computer services). Property assets (such as the premises) can be owned by this entity or a separate entity. Separating the ownership between entities provides a form of asset protection.
In a trust, a trustee can hold assets on behalf of one or more beneficiaries. Many doctors set up medical practices where a family trust (or discretionary trust) owns and operates the entity that owns the service entity, so that family members are beneficiaries who receive income from that entity.