Once you have your business idea in mind, the next step is to consider what business structure works for you.
Many new small business owners choose to start their venture as a sole trader – and for good reason!
Being a sole trader has many advantages. This blog explains some of the main reasons why nearly 800,000 Australians have chosen a sole proprietorship structure when starting their small business.
It will give the information you need to consider whether becoming a sole trader is the right choice for your situation.
Advantage One: Having no one to manage you
Ask a sole trader what is the best advantage of choosing this structure and they are likely to tell you one thing: being your own boss.
No longer will you have someone peering over your shoulder and questioning your decisions. It’s on you to make the big calls on everything from investments to marketing, and you can distribute your resources as you see fit.
Rather spending your time working for someone else, you will now have control over your career.
Advantage Two: It’s got a low barrier to entry
Compared to other business structures like companies and trusts, setting up a sole trader business is pretty easy.
All that is required is an Australian Business Number (ABN) and registering a business name through the Australian Business Register (ABR).
You will then need to contact the Australian Tax office (ATO) to ensure you are connected through their national system and to check whether you need to register for Goods and Services Tax (GST).
After that you are essentially good to go in terms of being legally allowed to operate.
For a more detailed look at setting up a sole trader business, check out this blog.
It’s also best to consider seeking the advice of a qualified professional, such as a financial adviser or accountant, during this step to ensure you are starting off on the right track.
Advantage Three: You get to keep your profits
For many skimming this blog, this advantage is sure to catch the eye. Sole traders have the most control of their business’ finances – and therefore its profits – compared to other business structures.
Under a company, you have a responsibility to pay shareholders and potentially board members, while you will have to split the profit under a partnership or a trust.
While you are still required to pay your workers a fair wage and your suppliers what they are owed, you have full discretion over what to do with the rest.
You could reinvest it back into your business or even just enjoy yourself a little and have a holiday. Who’s going to stop you?
You have taken on the responsibility of running a sole trader business and it’s your money at the end of the day.
An important tip: Consider your risks!
While there are many advantages of being a sole trader, the choice does come with an element of risk.
Sole traders are personally responsible for all aspects of their small business.
While this means that they take all the share of the decision-making and profits, they are also personally liable for any losses or debts.
Unlike a company where responsibility falls on the legal entity of the business and not the individual, it is the sole trader’s personal assets at risk.
This makes sole trader insurance a critical safeguard for sole trader businesses, as it’s designed to protect against some of the common risks they are likely to encounter.
Public Liability Australia has made getting sole trader insurance a simple process. All you will need to do is jump online, compare quotes from leading Australian insurers and get protected in minutes.
The bottom line
All things considered, there are plenty of reasons to join the growing number of Australians starting up sole trader businesses across the country. While starting a business under any structure can be risky, sole trader structures carry the added weight of personal liability.
But with great risk comes great reward. With sole trader insurance protecting your business and other assets, you can have the peace of mind in growing your dream business for years to come.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.© 2022 BizCover Pty Limited, Public Liability Australia is a business name of BizCover Pty Ltd (ABN 68 127 707 975; AFSL 501769)
