Sole trader or company: which structure suits your business?
The structure you choose affects your tax, your personal liability and your paperwork. Here is a plain-English comparison.
Choosing a business structure is one of the first decisions you make — and one of the most important. Here are the key differences between the two most common options.
Sole trader
- Simple and inexpensive to set up — you need an ABN
- Business income is reported in your individual tax return
- You are personally responsible for the debts of the business
- Fewer reporting obligations
Company (Pty Ltd)
- A separate legal entity registered with ASIC, with its own ACN, ABN and TFN
- The company pays tax on its profits and lodges its own tax return
- Generally limits the personal liability of shareholders
- More obligations: annual ASIC review, financial reports and director duties
Which is right for you?
It depends on your expected income, the risks in your industry, whether you plan to grow or bring in partners, and how you want to take money out of the business. Many people start as a sole trader and move to a company later.
We can compare the options using your own numbers and complete every registration for you. See our Company / Business Registration & ASIC service.
Need advice on your situation?
General information only — speak with a Registered Tax Agent before acting.
