Outgrowing sole trader status

You’re a sole trader, business reporting is simple, and your only responsibility is to yourself – and your customers. But enter into a partnership or take on company status, and you’ll have to tick a few more registration and reporting boxes to comply with the regulations. So where do you start?

Consider your structure

As a sole trader you are the only owner of your business and have complete responsibility for all aspects of it. But if you expand, take on more staff or a partner, you may want (or have) to change your business structure. Two of the most common types beyond sole trader are:

 

• Company: a legal entity that’s separate from its shareholders.
• Partnership: an association of people or entities running a business together but not as a company.

 

If you expand to become either of these structures, it will affect your registration and tax obligations.

Apply for an ABN

You cannot use your personal Australian Business Number for your business once you grow beyond being a sole trader. A partnership or company will need its own ABN that is distinct from your (and other partners’ or members’) personal number.

Think about a business name

If your business wants to trade under a different name to its legal name (which could be your own name), you’ll need to register it with the Australian Securities & Investments Commission (ASIC).

 

When coming up with a new business name it’s important to consider whether a suitable domain name is available for your website and emails. So it’s a good idea to choose both at the same time.

Register your company

If you’ve chosen to expand to become a company, it must be registered under the Corporations Act 2001. 

 

If you are scaling up from sole trader status, you’re most likely to become a ‘proprietary limited company’ (Pty Ltd) Ltd. 

Register for GST

If you’re not already registered, and your business is likely to turn over more than $75,000 per year, you must register for GST. Just to be clear, the $75,000 refers to income, not profit.

 

If you anticipate passing this milestone during a current financial year, you should register within 21 days of ‘realisation’.

Review other requirements

Depending on the way you run your business, you may also have to register for Pay as You Go (PAYG) withholding tax, or for elements such as Fringe Benefits Tax. The good news is that you can find out more about these taxes and do all your registering via a single portal.

Do all your registrations in one place

You can apply for an ABN, register your business name and company, and register for GST and other taxes, all on the business.gov.au website.

Manage your finances

With your new company status you’ll need a business bank account, to clearly separate your personal financial affairs from your business ones. You might like to consider one of the business bank accounts¹ offered by Westpac. 

 

With the expansion of your business you may also wish to set up a bookkeeping system incorporating small business accounting software. And if you don’t already have an accountant, now’s the time to appoint one to help you manage your income, expenditure, expenses and cash flow, and to receive specific guidance at tax time.

Start trading!

You’ll need to think about how to take payments, which could be with cash, through direct transfers into your bank account, by credit card over the phone, or using a portable EFTPOS terminal. Generally, the more options you can offer the better.