The Top 5 Benefits Of Being An Australian Sole Trader
In this article, we take you through the top sole trader benefits and how they may impact you.
The top benefits of being a sole trader include being your own boss, keeping all your profit, lower cost to setup & winddown, and less oversight.
If your thinking of finally taking the plunge and getting that business set up then you have come to the right place.
It is very important that you consider all pros and cons before starting a business and how your personal situation may be affected as the benefits are only one side of the story.
Sole trader benefits need to be weighed against the security of full-time employment. The top benefits are an increased share of the profits and less oversight from both an employer and the government.
What Is A Sole Trader?
In order to understand the sole trader benefits, we must first understand what is a sole trader?
A sole trader is an Australian business owner who has an ABN (Australian business number) and who solely owns and operates their business.
In this business structure, you are totally financially and legally responsible for the business and any of its operations. A good example of this would be an electrician who works for themselves.
As s sole trader you can either work for your self or have your own employees, however unlike a company you can not be an employee your self.
How To Become A Sole Trader?
To become a sole trader you must apply for an ABN. An ABN is an Australian business number that is assigned to you once you have completed your application. This number is used to identify you as a business in Australia.
The application for an ABN is made to the ABR (Australian Business Register). This government body is responsible for collecting and storing business and organisational details across Australia.
Once you have an ABN you operate as a sole trader (as long as you do need special licensing etc).
As a sole trader, you will still use your personal TFN (tax file number) and be bound under the same tax laws as an individual.
Sole Trader Benefits
1.You are your own Boss
The first sole trader benefit is the most popular by far, being your own boss. This seems to be the thing people aspire to the most and regularly associate with success.
Being your own boss can certainly be challenging, however, the benefit of having complete flexibility and ownership over your work and business is amazing for many people.
No more asking permission for a day off on your birthday or even more important, no more disagreements about the approach you should take with a particular task or project. Being your own boss means you get the final say every time.
2.You Keep All Profits
The next on our list of sole trader benefits is, of course, money. when you work for someone you trade your time for a set hourly rate or a small percentage of revenue in the form of commission when you are a sole trader you keep it all.
Any profits the business makes goes directly into your pockets. This also means any losses incurred by the business are your responsibility, but the low start-up costs and uncapped upside generally makes the risk worth it.
We advise seeking professional advice before making any investments in a business and making sure you track all your finances using bookkeeping software.
3.Lower Set Up Cost
Setting up as a sole trader is a much cheaper alternative to creating a legal company. This is great as you may want to test your business before you decide to invest in the company set up costs.
The low cost also means you can try out many ideas without the added legal expenses each time.
All you need to legally trade as a sole trader is an ABN which is completely free. This sole trader benefit also extends to not having to pay your self as an employee which will cut down on both time and expense.
4.You Can Wind Up Quickly
Things happen in business, you may change direction, move country, realise the business will not work, etc.
When you are set up as a sole trader the benefit if any of these things happen is you can quickly wind down the business with very little cost or paperwork.
Another great thing about this structure is your ABN can be used for another business ( As a sole trader ) with out needing to re-apply.
5.You Have Less Government Oversight
Privacy is the next sole trader benefit and it’s certainly one to be happy about. The reporting guidelines for a sole trader and much less invasive and strict when compared to a company or trust.
This gives you as a business owner much more privacy from the government and affiliated departments.
That wraps up the top 5 sole trader benefits, remember, this does not mean there is no risk attached to starting a business. Please seek advice from professionals and industry veterans before any business venture.
In the meantime check out our guide below for a helping hand.