*Includes 1-2 year registrations. After this term, we can renew them for you.
A sole trader structure is a popular go-to for new businesses. It's the easiest and simplest way to get into business if you’re a one person show, because there isn't much legal hoop-jumping and it's the least expensive to start.
You are the owner and operator, so you’re in charge of the whole shebang. This means your ABN will be connected to your personal name and you will use your personal Tax File Number (TFN) for the business’s taxation, which will also be used when or if you choose to register for GST.
It’s important to note that because you and the business are considered to be the same entity, you and your personal assets are liable for all debts of the business, even in excess of the amount you invested, regardless if they are listed in your business name or not.
Sarah decided to start her own business after her hobby as a makeup artist took off. Operating as a Sole Trader was the cheapest way to get started compared with the other business structures. All she needed to do was register her business name, set up an ABN and secure her domain name.
As the business owner, she’s not considered an ’employee’ and she pays herself a wage directly out of her profits. Any losses or expenses incurred by her business activities may be offset against other income earned, which may reduce her tax bill.
Trading a Sole Trader has been pretty easy, but the one thing she realises is that she is legally responsible for all aspects of the business – it’s called unlimited liability. That means that if things go south, her personal assets are at risk and could be seized to pay any debts or meet liabilities. She also needed to make sure she had the right insurance to protect herself against any damages she may cause as a result of her business activities.
Being self-employed is probably the best thing that’s ever happened to Sarah. She has the freedom to do what she wants, and run her business as she chooses – minus a fair bit of the red tape and compliance that comes with running a company.
Sarah plans to hire staff to help her grow the business, which she can do as a Sole Trader. She can also change her business structure later on if she wants to scale up.