Key aspects of a Sole Trader

Over the next few weeks I am going to provide some information on the different pros and cons of each business structure.  This is as a guide only, and should not be considered as advice as your business is unique.  If you require further assistance in regards to your structure of business then please feel free to contact Cloudhouse!

Key aspects of a sole trader structure
• Is simple to set up and operate.
• Gives you full control of your assets and business decisions.
• Requires fewer reporting requirements and is generally a low-cost structure.
• Allows you to use your individual Tax File Number (TFN) to lodge tax returns.  GST registration $75,000.
• Has unlimited liability - all your personal assets are at risk if things go wrong. Your assets can be seized to recover a debt.
• Any losses incurred by your business activities may be offset against other income earned (such as your investment income or wages). Subject to certain conditions.
• Doesn't require a separate business bank account, unlike a company structure. You can use your personal bank account but must keep financial records for at least 5 years.
• As the business owner, you're not considered an 'employee' of the business. You should pay yourself, which is usually a distribution of your profit, but this is not considered 'wages' for tax purposes.
• If you're a business owner without employees, there's no obligation to pay payroll tax, superannuation contributions or workers' compensation insurance on income you draw from the business. You can choose to make voluntary superannuation contributions to yourself though, to help build up your superannuation.
• You can employ people to help run your business. There are compulsory obligations you must comply with, such as workers' compensation insurance and superannuation contributions.
• It's relatively easy to change your business structure if the business grows, you wish to wind things up and close your business.
• You can't split business profits or losses made with family members and you're personally liable to pay tax on all the income derived.