{"id":1011,"date":"2022-11-24T05:56:41","date_gmt":"2022-11-24T05:56:41","guid":{"rendered":"https:\/\/teamworkaccounting.com.au\/?p=1011"},"modified":"2022-11-30T02:36:50","modified_gmt":"2022-11-30T02:36:50","slug":"the-ultimate-guide-to-running-a-sole-trader-business","status":"publish","type":"post","link":"https:\/\/teamworkaccounting.com.au\/the-ultimate-guide-to-running-a-sole-trader-business\/","title":{"rendered":"The Ultimate Guide To Running A Sole Trader Business"},"content":{"rendered":"\n

If you\u2019re starting a new business or considering your current business structure, you may be unsure if you should operate as a sole trader or take the plunge and register as a company. In Australia there are four main types of business structures<\/a> to choose from. Chat to us if you need help choosing the right one.<\/p>\n\n\n\n

We’ve put together this comprehensive sole trader guide for you.<\/strong> Our goal is to help you navigate your way through all the questions. It\u2019s got everything a sole trader needs to know. So, let\u2019s get into it.<\/p>\n\n\n\n

What is a sole trader?<\/h2>\n\n\n\n

Let\u2019s start by answering the question, \u2018What is a sole trader business?\u2019<\/p>\n\n\n\n

A sole trader is an individual running a business as a single owner. You control and manage the business in your personal capacity.<\/p>\n\n\n\n

As a sole trader, you are legally responsible for all aspects of the business. This includes debts, and losses. These cannot be shared with other individuals.<\/p>\n\n\n\n

You can employ workers in your business but you can\u2019t employ yourself.<\/p>\n\n\n\n

Essentially, you\u2019re the captain of your own ship. You alone call the shots. But if your ship sinks or runs into any other ships, you\u2019re responsible. <\/p>\n\n\n\n

Some examples of sole traders include hairdressers, business consultants, freelance writers, and tradespeople – any one-person operated business, as the name suggests.<\/p>\n\n\n\n

Sole trader advantages<\/h2>\n\n\n\n

There are a few key advantages to operating as a sole trader. This low-cost structure gives you full control of your assets and business decisions. You have fewer reporting requirements and you can use your individual tax file number (TFN) to lodge tax returns.<\/p>\n\n\n\n

Sole trader disadvantages<\/h2>\n\n\n\n

Being a sole trader also comes with some clear disadvantages. The main one being that you have unlimited liability for debts. That means that there’s no legal distinction between private and business assets. Any business loss or claim against your business, can be extended to you personally.<\/p>\n\n\n\n

This is a key reason why you should chat to us<\/a>. We can help you structure your business and help you protect your family home and personal assets.<\/p>\n\n\n\n

Another down-side is that as a sole trader you are responsible for making day-to-day business decisions. You won\u2019t have the assistance of a partner. That\u2019s another good reason to work with an accountant that offers you good business advice<\/a>. Your capacity to raise capital is also limited as investors very rarely invest in sole proprietorships because there is no personal asset protection.<\/p>\n\n\n\n

One area a lot of sole traders struggle with in their business is cash management. If you are interested in learning more cash management tips, speak to our team today.<\/p>\n\n\n\n

Do sole traders pay tax?<\/h2>\n\n\n\n

Yes, sole traders are liable to pay tax. You don\u2019t pay tax separately for your business activities though. Let\u2019s break down some of the frequently asked questions about sole trader tax.<\/p>\n\n\n\n

How to pay tax as a sole trader in Australia?<\/h3>\n\n\n\n

Operating as a sole trader in Australia, you are required to report all of your income in your individual tax return. Use the section for business items to show your business income and expenses. There is no separate business tax return for sole traders.<\/p>\n\n\n\n

How much tax does a sole trader pay? <\/h3>\n\n\n\n

You will be liable to pay tax at the same income tax rate as that you pay as an individual taxpayer. Note that you may be eligible for some small business tax offsets. Chat to us for more info on that. <\/p>\n\n\n\n

Do sole traders get a tax return?<\/h3>\n\n\n\n

If you operate your business as a sole trader, you must lodge a tax return, even if your income is below the tax-free threshold.<\/p>\n\n\n\n

In your return you will need to report:<\/p>\n\n\n\n