Sole trader regulations in Australia
Posted by Alisha Solanki in Sep, 2014
What are Sole traders?
– A sole trader is the simplest business structure. This particular structure is cheap to set up as there are only a few legal and tax formalities. If a business is operated as a sole trader, you are legally responsible for all aspects of the business.
What are Sole traders like?
– Sole traders are like marathon runners. They receive merit on their own efforts put in.
What is the purpose of Sole trader?
Being a sole trader means you are the sole owner of the business, and so you can trade in your own name. And because you’re using your own name, you will not have to register a separate business name. From a legal perspective, there is no distinction between the owner and the business itself. Like any other business, sole traders can have staff under their employment. However, there is risk involved in being a sole trader because your personal assets will be at risk from any liabilities that the business incurs – this is sometimes referred to as ‘unlimited liability’.
Two of the main advantages of being a sole trader are the low start-up costs involved and the reduced regulations, in comparison to other structures. However, if the business becomes successful it usually leads to an increase in risks, responsibilities and complications. This is why so many sole traders seek legal advice as soon as their business starts to take off.
What are the different types of Sole traders?
– There is actually no other type of sole trader out there, they’re in fact are people who trade as sole traders, like: EBay Sellers, Electricians, Personal Trainers, Plumbers and even market stalls.
What’s involved with setting up a business as a Sole trader?
- Firstly think of a decent idea to do a business on
- Make a really rough plans and ideas on what you want to do with the business and how far do you want to see it go
- Go to an accountant.
- Structure and Finance
Where does the decision to set up a business as a Sole trader fit into the process of starting a business?
– The person itself has to decide what type of business he/she has, and then can determine what structure it is
How does operating as a Sole trader impact on different areas of a business?
“… easy to set up – but difficult to keep a float”
The main advantages of a sole proprietorship are that they are easy to start up, they are subject to fewer regulations relative to other types of businesses, the owner has full autonomy with regard to business decisions, and they are easy to discontinue. Another advantage is that one takes all the profits of the business.
A disadvantage of a sole proprietorship is that as a business becomes successful, the risks accompanying the business tend to grow. To minimize those risks, a sole proprietor has the option of forming a corporation, or, more recently, a Limited Liability Company.
What terms are used when setting up a business as a sole trader?
– Australian Business Number (ABN):is an 11 digit identifier for all business dealings with the tax office and for dealings with other government departments or even agencies.
– Goods and Services Tax (GST): is a broad-based, consumption tax and is levied at a rate of 10% on the supply of most goods and services consumed in Australia
– Income Tax: By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public.
– Unlimited Liability: means that owners can held personally accountable for a business’s debt.
Where can I find more information about a setting up a business as a sole trader?
- Find 3 relevant and authoritative articles from the internet.
http://www.smallbusiness.wa.gov.au/sole-trader/
Who would most benefit from this knowledge?
This article primarily targets a learner level – people with no experience in this area. This knowledge is most needed for staff members. State Government Laws has influence over this area. There are no cultural influences that impact on this area. Climate does not have an impact on this area either. The organisation type that would find this information most relevant is the Start-up organisation as this articles consists of very basic knowledge on Sole Trader Regulations that new comers and people will need before-hand. This information is relevant to all industries.
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