Confusing terminology like sole trader can only serve to complicate the process of starting your own businesses. The structure of your business will set the tone and atmosphere for years to come. The majority of small businesses which are created each year tend to be sole traders. Here we’ll outline the benefits of being a sole trader.
1. Be your own boss
When starting a business there are a couple of options. In the case of small businesses, it may be a struggle to choose between a partnership or a sole trader. As a sole trader, you have complete say and control over what happens in your business. If you decide to not be a sole trader this means giving up some of your power and ultimately the direction of the business. The problems of clashing views and goals may be something you want to avoid entirely. Therefore, being your own boss is not only practical but intrinsically satisfying.
2. Sole trader tax concessions
As a sole trader, your business income is taxed the same way as your income which you would receive from any other job. However, being a sole trader can allow you access to small business tax concessions. These are discounts on the tax you pay in the hope that it allows your business to grow and become more competitive in the market.
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3. Legal Costs
Starting a business always comes with a host of legal checks and forms to go through. A sole trader is actually the easiest when it comes to ticking the legal box. In the case of other structures like a private company there are initial legal costs like PAYG registration, co-founders agreements and a constitution. Likewise, there are ongoing legal requirements such as reporting to ASIC.
4. Profit
A sole trader doesn’t need to share profits. Now, of course, they need to give employees wages and entitlements. However, when it comes to a partnership, everyone has to split the profits. There will be the advantage of more money injected into the opening of your business but whether the trade-off in profit and control is worth it, is up to you. You should also be aware of superannuation. As a self-employed individual, it is important to work out if you are going to pay yourself superannuation for when you retire.
5. Marketing
Marketing is your way to get the news out to people and set yourself apart from competitors. If you decide to become a sole trader you can definitely use the small business card. This could range from being a small business cafe to a family owned technical repair shop. The sole trader structure allows you to build an image, one that is different from the cliche of a faceless large company. Instead, you can try to present yourself as local, personal and invested in the community.
Conclusion
Starting a business shouldn’t be a messy process. If simple and quick is your thing, then becoming a sole trader could be the option for you. Other options like companies can leave you with less legal liability but those benefits may not outweigh the cost and difficulty. A sole trader is how you can make your start today with an ABN and a registered business name.
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