Thinking of changing from a sole trader to a company?
Category : Practice Updates
As your business develops, you may need to restructure to adapt to changing needs.
One of the most common changes small businesses make is moving from operating as a sole trader to a company. It can be challenging to know which business structure is right for you.
To help you understand the key differences between these two structures, the Australian Taxation Office (ATO) along with the Department of Industry and Science and Australian Securities and Investments Commission (ASIC) have joined forces to create a checklist called Key differences between sole traders and companies. The checklist guides you through important points that people often misunderstand when choosing a new business structure, such as:
- taxes
- liabilities
- responsibilities
- asset protection, and
- ongoing costs.
Knowing the key differences will help you understand your obligations, so you can get things right from the start.
Even though operating through a company is more complex, there are some advantages and you can minimise compliance costs by meeting your obligations on time.
If you do choose to operate as a company, it’s a good idea to read the ASIC guide for small business directors. The guide explains your role, responsibilities, and potential personal liabilities as a director.
Use the checklist to test your knowledge before making the change.
Next steps:
- Use the Business.gov.au Checklist – Key differences between sole traders and companies
See also:
- Business.gov.au Sole trader to a company
- ATO Choosing your business structure
- Australian Securities and Investments Commission (ASIC) ASIC guide for small business directors