Selecting the most suitable drone business structure is a pivotal decision for any new business owner as it shapes their ventures’ legal, financial, and operational landscape.

Various options, including sole proprietorships, partnerships, companies, and trusts, are available. Each option has its own advantages and considerations. The business structure needs to be carefully selected so it can avoid business failure. 

Factors such as liability, taxation, compliance requirements, and growth objectives play critical roles in determining the most appropriate structure for a drone business. Understanding the intricacies of each structure within the regulatory and drone business environment is essential for new business owners to make well-informed decisions that align with their goals and set the stage for long-term success.

Sole Trader

Sole trader businesses represent one of the simplest and most common business forms. In this model, an individual operates their business as an unincorporated entity, assuming full responsibility for its operations, profits, and liabilities.

One key advantage of a sole trader structure is its simplicity; compared to other business entities, there are minimal legal formalities and administrative requirements. Sole traders have complete control over decision-making and operations, allowing for quick adjustments to market changes and customer demands.

However, a significant drawback is the unlimited liability that sole traders face, meaning they are personally responsible for all business debts and obligations.

Despite this risk, many individuals opt for sole trader structures due to their flexibility, ease of setup, and direct connection to their business’s success.

Company

Company business structures offer a distinct set of advantages and complexities.

Companies are separate legal entities, distinct from their owners or shareholders, providing a limited liability shield. This means shareholders are generally not personally liable for the company’s debts and obligations.

Additionally, companies have perpetual existence, allowing for continuity even in the event of changes in ownership.

However, establishing and maintaining a company involves compliance with various regulatory requirements, including registration, reporting, and corporate governance. Despite these complexities, companies enjoy more access to capital through the issuance of shares and can benefit from favourable tax treatments on certain business expenses.

A company’s corporate structure facilitates growth and expansion. It separates ownership and management, enabling specialised roles and professional management practices.

Partnership

Partnership business structures offer a collaborative approach to entrepreneurship, wherein two or more individuals or companies share ownership, responsibility, and profits of a business venture.

Partnerships can take various forms, including general partnerships, limited partnerships, and incorporated limited partnerships, each with nuances in liability and management.

One of the primary advantages of partnerships is the pooling of resources, expertise, and networks, which can lead to shared risks and increased resilience. Additionally, partnerships typically involve fewer formalities and lower setup costs than corporations.

However, partnerships also come with inherent risks, as partners are personally liable for the business’s debts and obligations, which can potentially strain personal relationships if conflicts arise. Effective communication, clearly defined roles, and a well-drafted partnership agreement are essential for navigating the complexities of partnership structures and fostering a successful collaborative enterprise.

CASA does not permit partnerships to hold an authorisation (ReOC) because no one legal entity is responsible for or can be held accountable for the partnership’s actions or inactions.

Trusts

Trusts provide a unique way to manage assets and conduct business affairs, offering flexibility and distinct tax advantages.

A trust is a legal arrangement in which a trustee holds assets on behalf of beneficiaries and manages them according to the terms outlined in a trust deed.

One key advantage of trusts is their ability to distribute income and assets among beneficiaries in a tax-efficient manner, potentially reducing overall tax liabilities. Additionally, trusts offer asset protection benefits, as assets held within the trust are generally shielded from beneficiaries’ personal liabilities.

Establishing and administering a trust involves compliance with complex legal and taxation requirements, and the structure may not be suitable for all business scenarios. Proper planning, professional advice, and consideration of the specific needs and objectives are crucial for effectively utilising trust structures.

CASA will not issue an authorisation (ReOC) to a trust. However, in business structures involving a trust, an authorisation like a ReOC can be issued to the trustee, usually a company.

Changing a drone business structures

CASA does not permit the transfer of authorisations between legal entities. For example, transferring a ReOC from a sole trader structure to another sole trader or company is impossible. If you choose to change your business structure in the future, it will likely involve redoing the assessment /s for whatever approvals are held. This can be expensive and time-consuming and considerably disrupt your business operations.

If you plan to sell the operation you are establishing, the limitation on the transfer of authorisations placed on a sole trader structure should be accounted for when setting up the business.

Getting Advice

Choosing the proper drone business structure is a critical decision that can significantly impact your business’s legal, financial, and operational aspects. It is essential to seek professional advice from qualified business advisors, accountants, or lawyers when making this decision.

Professionals can provide tailored guidance on the advantages and disadvantages of various business structures, such as sole trader, partnership, company, or trust, and how each structure affects your tax obligations, liability, and regulatory compliance.

They can also help you understand the implications of your choice on future business growth, funding options, and potential legal issues. Consulting with a professional ensures you select the most appropriate drone business structure for your specific needs and goals, providing a solid foundation for your business’s success.

More information about choosing the right business structure can be found here. 

Comparison of company and sole trader as drone business structures

	Advantages	Disadvantages
Company	Limited Liability: Shareholders’ liability is limited to their investment, protecting personal assets. Access to Capital: Raising funds through issuing shares and accessing financial markets is more accessible. Perpetual Existence: Companies can continue to operate even if shareholders change. Tax Benefits: Corporations often enjoy tax deductions on drone business expenses and may have lower tax rates than individual tax rates. Professional Image: A corporate entity can lend credibility and professionalism to the drone business. Growth Potential: Access to capital and resources makes it easier to expand operations and enter new markets. Employee Benefits: To attract and retain talent, employee benefits such as health insurance, retirement plans, and stock options can be offered.	Complexity and Regulation: Corporations are subject to extensive regulations, reporting requirements, and governance structures. Double Taxation: Profits are taxed at the corporate level and when distributed to shareholders as dividends. Costs: Higher initial setup costs and ongoing administrative expenses such as legal fees, accounting fees, and compliance costs. Ownership Dilution: Issuing shares to raise capital can dilute ownership and control. Corporate Governance Issues: Potential conflicts of interest between shareholders and management lead to agency problems. Market Volatility: Share prices can be affected by market fluctuations and investor sentiment. Less Flexibility: Decision-making can be slower due to hierarchical structures and corporate policies.
Sole Trader	Simplicity: Easy and inexpensive to set up and operate with minimal formalities. Direct Control: Sole traders fully control decision-making and operations. Flexibility: Able to quickly adapt to market changes and customer demands. Tax Benefits: Can offset drone business losses against other income and take advantage of various tax deductions. Privacy: Sole traders have more privacy as they are not required to disclose financial information publicly. Personal Connection: Closer relationship with customers and clients, fostering loyalty and trust. Profit Retention: All profits belong to the sole trader, allowing personal financial growth.	Unlimited Liability: Sole traders are personally liable for all business debts, risking personal assets. Limited Access to Capital: It is difficult to raise significant funds compared to corporations, relying mainly on personal savings or loans. Limited Expertise: Sole traders may lack specialized skills or resources compared to larger companies. Limited Growth Potential: Expansion may be limited due to financial and resource limitations. Risk of Burnout: Sole traders often take on multiple roles, leading to overwork and burnout. Difficulty in Succession: Business continuity can be challenging if the sole trader becomes incapacitated or wishes to retire. Perception: Some clients or partners may prefer to work with larger, more established companies because they are perceived as more stable and reliable.

 

**Disclaimer: No Business or Legal Advice Provided**

The information provided in this document is for general informational purposes only and is not intended to be business or legal advice. While we strive to provide accurate and up-to-date information, it should not be relied upon as a substitute for professional advice from a qualified business advisor or attorney. We do not accept any responsibility or liability for actions based on the information provided. Always seek the advice of a competent professional with any questions you may have regarding business registration or legal matters.