The simplest method to take, but be careful with tax traps.
Being a sole trader can be a fun way to start a new business, provided that you are running an 'one-man business' without worrying about hiring employees. However, it is not without hassle or rules bound within this business structure. At Tax Ideas Accountants & Advisers, we offer a free initial consultation in understanding your business needs and provide accounting solutions to assist you as a sole trader.
Consider finding an expert to discuss your current operating problems or strategies, Tax Ideas Accountants & Advisers is an 'One-Stop' platform in providing consultation service and Tax Advice for different kind of business.
Let us quickly look at the upsides of being a sole trader
- Full control of your business - You can make decision quickly and efficiently given that you are the sole person who controls and manages the whole business
- Easy to switch to other different business structure
- You own the business and receive all profits
- You are not entitled to make public of your accounting records and hence remains the upmost private of the business
- There is no need for TFN registration separately for your business, the profits that earned from the business are taxed along with your other income as shown on Personal Income Tax Return
Oftentimes, sole traders are successful
Starting your business as a sole trader is simple to set up and operate as a beginner, as a business owner who retains a full control of all assets and decision-making rights. There are fewer reporting requirements as in contrast to company structure. Subject to certain conditions and rules, any losses that incurred within your business activities can be used offset against investment income or wages.
- A sole trader can you his Individual Tax File Number to lodge tax returns.
- As a ‘one-man’ show, the sole trader is not considered an employee of the business and therefore there is no payroll tax, superannuation or worker’s compensation.
- This is a fairly simple and easy business structure for any start-up business to grow or wind things up at the end.
- A more personal approach to client on a one-on-one basis can easily be achieved, close relationship with customers and rapport provides a higher level of customer service and care. In a way, the closer relationship with the client provides you more capacity to react fast to their needs as you can sense the changes through the frequent interaction with the clients.
The challenges of being a sole trader
A sole trader is personally responsible and liable for business debts, sometimes, a sole trader can lose everything range from small assets such as car, inventories to house, should the business fail to generate profits. Moreover, it is also comparatively challenging to raise finance especially in requesting for larger sum of fund. Lastly, further down the line, it can also be difficult to expand the economies of scales, as very likely suppliers prefer offering bulk sales to bigger business other than sole trader due to credit risks.
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