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Apply Online NowWhat is a sole trader?
A sole trader is a business owned and operated by an individual. It’s the easiest and most cost-effective way to start a business. However, as a sole trader, you’re personally responsible for any losses and debts incurred by the business. This means that you’re also personally liable for any legal action taken against your business.What is a company?
A company is a legal entity separate from its owners. One of the main benefits of company vs sole trader in Australia is, unlike a sole trader, a company can continue to exist even if the owners change or leave. Companies also benefit from limited liability, meaning that their owners are not personally liable for the company’s debts or legal action taken against it.Our Team of Finance Experts
If you need more help with the subject of sole trader vs company, feel free to contact us and our team of finance experts will be more than happy to help you.
Talk to Our TeamSole trader vs company: Key differences
- Registration and fees — Sole traders pay very little to register their business with the government and can be up and running quickly. Companies must register with the state or federal government and may incur higher registration fees.
- Liability — As a sole trader, you are personally responsible for any losses or debts incurred by your business. Companies benefit from limited liability, meaning that the owners are not personally responsible for the company’s debts or any legal action taken against it.
- Fundraising and investments — Companies have an easier time raising capital and are more attractive to potential investors. Sole traders, on the other hand, may find it difficult to access funds from external sources.
- Tax rates and requirements — A sole trader and a company’s tax rate and filing requirements can vary significantly. Companies generally pay higher taxes than sole traders but also have access to various deductions and tax offsets that can help reduce the amount owed. Sole traders, on the other hand, can benefit from potential tax benefits for low-income generating businesses.
- Retained profits — Companies can retain and reinvest their profits in the business yearly. Sole traders are required to declare all income.
- Tax losses — Companies can carry forward tax losses to reduce income in future years. Sole traders cannot.
- Succession — Companies can continue to operate even if ownership changes. Sole traders have no such protection, and the business may end if the owner dies or decides to move on.
Is it better to be a sole trader or a company?
The answer to this question depends on a few factors, such as the size of your business, the risk you are willing to take on and the potential tax implications. Generally speaking, if you are a small business with minimal risk, then a sole trader may be your best option. If you are looking to scale up and take on investors, then a company may be the better option.Start your business right with Finance One
Finance One helps you every step of the way. Whether you need a personal loan, business loan or vehicle/equipment loan, we can help you get the financing you need at favourable terms. With competitive rates and the expert attention of your financial professionals, you can have peace of mind knowing that your business is in good hands.
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Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent advice regarding your legal, financial, taxation or other needs, to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. All loan applications are subject to normal lending criteria. Fees and charges payable. Terms and conditions apply.
