You may be wondering how to set up a sole trader business in Australia. In this article, we highlight the step-by-step process for Australia company registration for sole traders. However, before we begin, we must first understand what a sole trader business is.
What is a sole trader business?
A sole trader is an individual who is the legal owner of the business and is not only entitled to all the profits of the business but is also liable for all its debts and liabilities.
What are the benefits of a sole trader business in Australia?
- This form of business entity is simple and inexpensive to set up and operate.
- Owners have complete control of the business.
- There are fewer compliance issues as such businesses are not required for filing reports, paperwork, and more unlike other forms of business structure.
What are the drawbacks of a sole trader business in Australia?
- The owner has unlimited liability which means that his or her personal assets are at risk in case the business’s debt cannot be paid back.
- A sole trader business cannot raise as much capital as other business structures
- The owner will also be responsible for the day-to-day activities of the business and must make all the decisions so there may be limited skill set and a risk of making a wrong decision.
How to set up a sole trader business in Australia?
Step 1: Decide on a business idea
- Before starting a small business in Australia, you must choose a business idea that will be best suited for your knowledge base and skill set. Choosing a suitable business is imperative for the long run.
Step 2: Devise a business plan
- Once the business idea is decided, you must conduct market research to identify the existing competition and your target audience to devise your business plan.
Step 3: Check your finances
- You must check to see if you have adequate funds to complete Australia company registration and then continue to operate your sole trader business.
Step 4: Register the company using Business Registration Service (BRS)
- You are required to register your business with the Business Registration Service to obtain the Australian Business Number (ABN).
- In order to register for an ABN, the following requirements must be met:
- Proof of identity
- Business plan including the details of business activities
- Proof of address for z
- An ABN is an 11-digit number that confirms the identity of the business to the public. It is required for registering the company name, registering for tax, and more.
Step 5: Company name registration in Australia
- If you use a business name that is different from your own name, then you must select an appropriate trade name for your business. Otherwise, you do not need to register your name.
- You must check to see the availability of your preferred business name with the Australian Securities and Investments Commission (ASIC) business name register.
- You must then reserve it with the Australian Securities & Investments Commission Connect.
- For this, the following requirements should be met:
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- ABN number
- Availability of preferred name
- Payment of $37 for one year or $87 for three years
- In order to register your business name, you will be required to make a payment of $37 for one year of $87 for three years.
- Conversely, you can apply for the ABN number and the business name registration together with the Business Registration Service.
Step 6: Register for tax
- A sole trader business is required to pay tax at the income tax rate, using your individual Tax File Number. This is because as a sole trader, you must report the business income in your personal tax return.
- There is no need for a business tax file number (TFN).
- You must register for Goods and Services Tax with the Australian Taxation Office if:
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- the business has a minimum turnover of $75,000,
- provide taxi business or limousine hire business, or
- claim fuel tax credits.
- You must register for Pay as you go (PAYG) Withholding tax with the ATO if:
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- you are employing individuals to work at your business.
- You may be required to register for additional taxes with the Australian Taxation Office (ATO), depending on your business activities and revenues.
- There is no payment required for the registration for taxes.
Step 7: Register for trade license
- Depending on your business activity and location, you may be required to obtain a trade license for your business.
- To check for the required licenses and permits, you can refer to the Australian Business License and Information Service.
Step 8: Ensuring compliance with the law
- You must ensure that you are compliant with the laws of the government and making annual payments for taxes.
- You are not required to file any annual reports for your business.
Step 9: Applying for insurance
- Even though it is not compulsory, as a sole trader you can apply for insurance. This is because you will be held completely liable for any debts and liabilities of the firm in case of an adverse event.
The above registration process can be completed within one week. In our guide, we have not included the opening of a bank account because most sole traders use their personal bank account to perform transactions. However, if you wish to open a bank account, you can take advantage of our extensive banking network to open one with a well-reputed banking firm.
Find out more about how to set up a sole trader business in Australia
We, at Tetra Consultants, recognise that the process of setting up a company in Australia may be cumbersome and would therefore like to offer our services to you. We will assist you in the planning and strategizing process, the incorporation process, and even after by ensuring your compliance with the government policies.
Contact us if you wish to find out more about how to incorporate a sole trader business in Australia and our team of experts will revert to you within the next 24 hours.
