Sole Trader to Company


Business is intended to grow and desires to attain its goal through huge efforts. Organization may stumble across the needs which was boosting formerly but no longer significant. It can be business structure, payroll system or size of commercial space. Transformation from sole trader to a limited company is not peculiar in Australia. But few things should be kept in mind before transforming

Is it necessarily to transform?

Distinction between sole trader and company structure should also be consider prior transformation

  • Taxing Difference– Sole traders are taxed as individuals whereas companies are taxed as a separate entity.
  • Tax Rate– Companies pay tax at the corporate rate (27.5% for certain SMEs) whereas sole traders pay taxes based on their personal marginal rate
  • Income– Things required to report income, Way of reporting income
  • Paperwork and bookkeeping
  • Ongoing costs of operation
  • Who is accountable for business debts
  • Methods to assess business income
  • Employment regulations
  • Control of the business

When a company is been operated, owners personal assets are protected slightly from business losses and issues. Tax payer can also be benefited during Tax Return as business income can be divided between owners. It is feasible to transform to limited company if an individual needs to grow his business, as companies have significant capability to introduce new co-owners.

It is essential for sole traders to consider each factor before transforming to limited company. In Australia, small business counselors can assist in further distinctions and create well informed decision. 

If small business owner determined transformation then he would make sure that responsibility of the company director or officer will enlarge. Prior expansion it is essential to ensure new obligations as well as an individual responsibility.

How do I mould transforming a sole trader to a limited company?

Under the Corporations Act 2001, it is mandatory for directors to implement numeral obligations that span from obstructing the company trading during insolvent to announcing to refrain conflicts between company and personal interests. It is an obligation to appeals company name through ASIC, new Australian business number along with other mandatory registrations such as GST and PAYG withholding.

Taxes, Responsibilities, Asset protection and Operational costs will be distinct for companies. Before transition ensure that you approached to the right adviser which assists you to expand your business

To seek further information whether transforming from sole trader to a limited company is beneficial or for some reinforcement within itself, Contact to the Australian accountant team

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