Small Business Start Up Advice For Sole Traders

You’ve got the skills and expertise and now you’re raring to start a business in Australia. You’re keen on choosing the right business structure for your exciting new venture. You realise that your business has to have a legal structure that conforms to the Australian business scenario. So if you’re a skilled electrician, a competent hair stylist or an expert event organiser looking to begin your enterprise successfully, you might want to consider doing business as a sole trader.

Why Do Business as a Sole Trader?

The best way to answer that question is to consider how many of you are going into business together. Chances are, it’s just you. And your access to funding probably consists of personal loans and family borrowings. Which means you aren’t likely to have a lot of start up capital to begin with and you’re looking to borrow your funds. So that might rule out more expensive modes of starting your business, for example as a company.

You’re also the only one in control of just about everything in your business, including the income and expenses. You’re responsible for all the debts of your enterprise and also all the taxes. In which case, you might want to ponder on the benefits of being a sole trader.

Benefits of Being a Sole Trader

You can’t find a simpler business structure than a sole trader in Australia. You’re offering your services as a sole proprietor, meaning that you’re doing business as an individual. In fact, you are the business! What you’ll also be doing is getting off ground for far less in terms of cost compared to other, more complex business structures.

As a sole trader, you’re not a company registered in accordance with the Australian Corporations Act 1981. You’re not subject to the corporate tax rate. Instead, your business income is taxed as part of your personal income. You don’t have to get your accounts audited every year, either. There aren’t any shareholders in your company so your business transactions are more private when compared to a proprietary or limited liability company. You’re not subject to the lengthy and detailed reporting requirements that companies have to abide by.

What’s more, you can hire sub-contractors to do your admin or delivery work. You can outsource any part of your business, like the ordering or invoicing or accounting, so you’re free to concentrate on bringing in more custom.

Drawbacks of Being a Sole Trader

There are drawbacks, however, to being a sole trader. You’re solely accountable for the debts and the taxes of your business. If you fail to service the repayments on your business loans, you’ll find the banks breathing hard down your neck. And if you haven’t lodged your BAS and paid your GST on time, you’ll be getting pertinent reminders from the relevant authorities. You’re personally liable for anything that goes wrong with regard to the services you offer or the goods you sell. You can be charged in a court of law for any negligence in relation to your business and your liability to a claim for damages is unlimited.

Your business name is not a legal entity so when you sign a contract with your clients, suppliers or any third party, you’re the one responsible for fulfilling all the conditions and clauses in the agreement. Should you fail to adhere to any terms or conditions, you could be in for a rough ride financially. There’s nothing to stop your creditors from claiming your personal funds, your assets or even your house to settle outstanding sums owed to them. You can mitigate your possible losses, however, by getting the right insurance cover.

Sorting Out Your Business Plan

Developing your business plan as a sole trader isn’t as complicated as it sounds. You just need to be clear about why you’re going into business, what your projected income will be for the next three or so years and what your possible expenses may be. Then you’ll arrive at a projected profit for your business. You’ll have an idea of how profitable your new venture will be and the sort of expenses you’re going to incur. A business plan is vital if you’re aiming to approach financial institutions for a loan as start up capital.

How to Register Your Business Name?

Just about the easiest name to have for your business is your own. Alternatively, you might want a name like ‘Frances Flowers’ if you’re opening a little flower shop at the local mall. Either way, you have to register your business trading name with the relevant authorities.

First, check if your business name is already registered. If it isn’t, then get it registered with the Consumer Affairs Department or CAD in your state. You can only trade in the state where your business is registered unless you register in other states where you’re planning to trade. You must register your business name before commencing your operations

Your next step is to get an ABN or Australian Business Number. One thing to remember is that if you do business in your own name, you don’t have to register with the CAD. You just need the ABN. That’s the 11 digit number that you see on sales invoices. It’s exclusive to your business. You must also have a Tax File Number or TFN, which is critical for you to pay your business taxes. If you’re already a taxpayer, then you’ll use your TFN for your business as well. The Australian Taxation Office or ATO handles all applications for the ABN and TFN.

Then you have to register for GST or Goods and Services Tax so you can charge your customers 10% GST on sales invoices. You’ll have to account to the ATO quarterly for any GST you’ve paid to suppliers and received from your customers.

Getting the Right Asistance

Obtaining the right assistance is critical to avoid all the complications of setting up your business. Starting a Business Now gives comprehensive business start up packages, advice and guidance to anyone who is keen on starting business as a sole trader. From registering your business name and ABN to sorting out your GST, you’ll get everything you need under one roof from qualified experts well versed in every aspect of starting a business in Australia!

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