Are you thinking of growing your work, hobby or side hustle into a business? A popular well-known business structure as a sole trader could be your first step. As a sole trader, YOU will be making day-to-day business decisions that steer the business. You are also legally responsible for all aspects of the business including any debts and losses.
Perks of being a Sole Trader
Some of the perks of being a sole trader include the following.
- It is simple to set up and operate.
- Gives you full control over the business decisions and the business assets.
- There are fewer reporting requirements than for other business entities.
- It is generally a low-cost structure.
- You are able to use an individual tax file number (TFN) to lodge tax returns.
- It does not require a separate business bank account but is recommended. It will make it easier to keep track of the business income and expenses. Alternatively, you could also use a qualified accountant to assist managing the financial aspects and provide guidance.
- You can hire employees as a sole trader.
Liabilities and duties to consider
While the advantages are obvious, there are also some liabilities and duties for the sole trader including:
- Financial records must be kept for at least 5 years.
- Unlimited liability means that all personal assets are at risk if things go seriously wrong.
- Inability to split business profits or losses and distribute to family members.
- Personal liability to pay tax on all the income derived.
As your business grows you can consider upgrading your business structure. Each type has its own advantages and disadvantages. As you progress you should aim to stay well informed and seek expert advise early. For a free discovery session contact us today.