Our team at Stellar Accounts are regularly quizzed about the advantages and disadvantages of being a sole trader.
To help determine what business structure might be best suited to your needs, we’ve put together some more information about the pros and cons of becoming a Sole Trader – and how it compares to a Company and Trust.
What Does Sole Trader Mean?
Sole Trader is the simplest and most cost effective structure to use when you are first starting out in business.
How Are You Taxed as a Sole Trader?
As a sole trader, you simply record the business’s income and expenses in your own personal tax return.
On the downside, once you start trading at a profit, you’ll pay income tax at your applicable marginal tax rate (which could be up to 47% for those earning more than $180,000). The potential to split income between family members does not exist.
It’s also important to note that setting up as a sole trader does not provide you with any form of asset protection from creditors or protection in the event of family break-ups.
How to Set Up As Sole Trader
You need to register for an ABN in your name, register a business name (if required) and register for GST (you can register volunatarily at anytime, or wait until you hit the $75k business income threshold before registering).
Sole Trader Business Advice
Setting up a new business – make sure you have a chat to an accountant before you do so, so that you understand your tax obligations and also how to manage the accounting side of your business.
Stellar Accounts does business consults for $75 for 45mins (currently running a special until 31 January 2018 of $55 for 45 mins) – either in office, via phone or via skype. Contact us here or call 0428 887 104.
Other Related Blogs:
- Sole Trader vs Company vs Trust
- What are the Advantages of Setting Up A Company?
- Setting Up A Trust: Pros and Cons