What is a sole trader?

Lady sawing wood in workshop

A sole trader is the simplest business structure available to someone wanting to set up a business.

One person is the owner/operator of the business, so they have full control.

Setting up as a sole trader is easy and cheap because there aren’t many legal and taxation formalities.

The owner uses their own Tax File Number in the business, but also registers an Australian Business Number. There’s no flexibility at tax time.

The sole trader must be registered for goods and services tax if its annual turnover exceeds $75,000.

The business is not a separate legal entity from the owner which means the owner is personally liable for whatever happens, including debts.

As a sole trader, it’s difficult to raise funds to expand the business.

Being a sole trader has its own advantages and disadvantages compared to other business structures, so it’s very important to get legal advice early on about which structure will best suit your business.