What is the Best Structure for My Education or Training Organisation?

In Short

• Your business structure affects your control, risk and ability to attract investment.
• Sole traders have full control but unlimited personal liability for business debts.
• Partnerships and companies can support growth, but decisions and control are shared and structured.

Tips for Businesses

Choose your business structure based on how much control you want and how much personal risk you are willing to take. If you want to grow and attract investment, a limited partnership or company may suit you better. If you prefer full control, a sole trader structure may work, but you must manage financial risks carefully.

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Table of Contents

• Sole Trader
• Limited Partnership
• Limited Liability Company
• Key Takeaways
• Frequently Asked Questions

Setting up your own education or training organisation is an incredible way to apply your experience in the education industry to starting a business. However, it can take time to navigate the legal aspects of setting up your business, including deciding what corporate structure makes the most sense for you and your business. This article will look into several different corporate structures that you could use for your own business, looking first at operating as a sole trader, structuring your business as a limited partnership, or setting up your education or training organisation as a limited liability company.

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Sole Trader

Operating as a sole trader allows control, particularly for small education or training organisations. A sole trader has total ownership of their business and is responsible for all management and decision-making. This allows you to change your education business to offer English as a second language classes without approval.

On the other hand, a sole trader has unlimited liability for any losses or debts incurred by their business. If your business cannot repay a large debt, you must repay it using your personal funds. This creates significant personal risk for any business decisions you make. You should consider major financial decisions carefully when operating an education or training organisation as a sole trader.

Limited Partnership

Setting up a limited partnership supports education or training organisations with partners that plan to grow beyond a small business. A limited partnership involves several partners coming together to carry on a business. The partnership includes general partners who manage the business and limited partners who invest and receive profits without decision-making powers.

Operating as a limited partnership allows education or training organisations to access investment by admitting new partners. This also allows you to admit partners who help manage the business, thereby reducing your managerial workload. Greater investment and oversight enable expansion through new training centres or courses. Limited liability incentivises investment because limited partners risk only the amount they invest.

On the other hand, general partners remain personally liable for the company’s debts. Although partners share liability, significant company debts still create personal financial risk. Further, you retain less control because general partners share decision-making authority. If an opportunity arises to expand services or enter new markets, you must consult the other general partners.

Limited Liability Company

Operating as a limited liability company attracts investment and limits your personal liability for business debts. If you want to grow a large business with significant investment capital, a limited liability company may be the best corporate structure for your organisation. A limited liability company is owned by shareholders and managed by directors appointed by the shareholders. Shareholders risk only their invested capital, and voting power depends on how many shares they hold.

Investment can be raised easily by selling the company’s shares. Limited liability means that directors can be comfortable making risky decisions, as only the company itself is liable to repay debts. 

On the other hand, your decision-making power is significantly diluted, as you only have as much control over your business’ decisions as allowed by your share ownership. You can maintain decision-making power by owning a majority of the company’s shares, but this will limit your ability to attract investment by selling shares.

Key Takeaways

Choosing the proper corporate structure is important for setting up an education or training organisation.

• As a sole trader, you have complete control over all business decisions but are liable for any debts that your business incurs.
• As a limited partnership, your company can attract larger investments, and you can split decision-making between you and the other partners. However, general partners are personally liable for debts incurred. 
• Structuring your education or training organisation as a limited liability company provides investment opportunities and offers limited liability for debts incurred. However, your decision-making power is limited to what your shareholding allows. 

If you need help deciding what legal structure best suits your education or training organisation, our experienced education and training lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions