Sole Trader Business Structure

Sole Trader Business Structure

Sole Trader Business Structure

When it comes to creating and selecting an Australian company business structure, Inspire Accountants can help.

How does a sole trader business trader work?

A sole trader business structure can be simple to set up, but comes with considerable risk of consequences.

At Inspire Accountants, we strongly recommend business owners avoid operating as a sole trader business structure. Even a business not generating sufficient income to require a great deal of tax planning can still expose the owner’s personal assets to significant risk. If you’re looking to change out of a Sole Trader business structure but are not sure which is the right structure for your business, book a complimentary call with a Senior Accountant.

What is a sole trader business structure?

Establishing a business as a sole trader is the simplest form of business structure. It is relatively easy and inexpensive to start and maintain.

Many sole traders choose to trade under their own name but this is not a requirement. A sole trader can register a business name with the Australian Securities and Investments Commission (ASIC) and trade using this name instead.

A sole trader is essentially just an individual in business for themselves – they retain complete control of the business operation. There is no division between business assets or personal assets, which includes any assets jointly owned with another person (such as your house or car).

Your liability is unlimited which means that personal assets can be used to pay business debts. The individual is also responsible for remitting the tax on any business profits made at their marginal income tax rates.

After your first year of business profits the Australian Taxation Office will enter you into the pay-as-you-go (PAYG) instalments system. The PAYG system requires regular payments of preliminary tax based on expected profits for the following year. Any excess tax paid as a result of this will be refunded on lodgement of your income tax return.

Advantages and disadvantages of a sole trader business structure

Advantages of Trading as a Sole Trader

  • Easy and inexpensive to establish and maintain.
  • The individual retains complete control of their assets and business decisions.
  • Fewer reporting requirements.
  • Any losses incurred as a result of business activities may be offset against other income earned (such as investment income or wages), subject to satisfying certain conditions.
  • You are not considered an employee of your own business and are free of any obligation to pay payroll tax, superannuation contributions or workers’ compensation on the income you draw from the business.
  • Relatively easy to change your legal structure if the business grows, or if you wish to wind things up.

Disadvantages of Trading as a Sole Trader

  • Unlimited liability means all your personal assets are at risk if the business operation gets in trouble.
  • Little opportunity for tax planning – you can’t split business profits or losses made with family members and you are personally liable to pay tax on all the income derived.
  • Business debts and losses cannot be shared.
  • Requirements to pay preliminary tax on business income that may not have been earned.
  • Limited access to additional capital for business growth.

Reasons Inspire Accountants don’t recommend a Sole Trader business structure

  • Tax can be as high as 47%; where possible, we never want clients to pay such a high percentage of income tax.
  • No distribution to any other entities, like a spouse who may pay tax at a lower rate to you.
  • There is no protection of personal assets. This means that businesses sued could lose family homes, assets, and any savings in the bank.

If your business is set up as a sole trader, you are personally liable for consequences that may not be of your own creation. A disgruntled employee, a careless oversight or even just plain old bad luck could put your personal assets directly on the punitive firing line.

Brisbane Accountants to help restructure sole trader business structures into a Company

Business owners looking to shift their business operations from a sole trader structure into a private company can experience a number of benefits. However, there are also a number of key differences and potential issues that must be understood and carefully managed. 

We strongly recommend anyone interested in setting up a company seek professional advice before doing so.

Contact us online to get started.


Family means the world to us so we only work with business owners who believe that family is their most important business.

What’s the point of great financial success if it comes at the cost of precious moments with those who we love most?

We work with clients who want to better understand the numbers that grow their business and as a result we have clients who are –

  • Dentists, Doctors, Psychologists, Physiotherapists and Psychiatrists
  • Property Developers, Project Managers and Builders
  • Personal Trainers, Gym Owners and
  • Marketing Agencies, Educators & Online Retailers
  • Lawyers, CFO’s, Directors and CEO’s

But most importantly our clients see themselves primarily as proud –

  • Mums & Dads
  • Husbands & Wives
  • Boyfriends, Girlfriends & Life Partners
  • Sons & Daughters
  • Nans & Pops
  • Cousins, Aunties & Uncles

In fact we don’t call our clients ‘clients’, they are affectionately known as our Inspire Family.

You might like to know that our clients are located all over Australia with a strong presence around Brisbane, Sydney & Melbourne.

We help entrepreneurs and business owners:

  • Understand the Numbers that Drive their Business
  • Structure Effectively for Business Growth
  • Carry out Strategic Tax Planning
  • Implement Cloud Business Solutions
  • Keep Tax and Accounting Lodgement Obligations Squared Away
  • Set up and Run Self Managed Super Funds

We’re best known for 2 game-changing small business services –

“It’s all sorted” – a proactive small business tax and accounting service that pays for itself in tax savings. Our average tax savings for 2017 was $27,000 per client which is a 3.5 x return on their investment in our service.

“Get Cashed Up” – an 18 month business development service for business owners to double their profit and double their days off. Based on the 7 step method to pull more money, time and happiness from your business from the book “Cashed Up: 7 Steps To Pull More Money, Time and Happiness From Your Business”.

Yes, we more than cover your standard accountant’s’ role, and our clients say we’re set apart by two main things:

  1. Our ability to provide peace of mind through explaining the why and not just the what; and
  2. That we’ve “bought in” to their business, shoulder to shoulder, with intention to grow together.

We have a unique approach to providing insight into the numbers for entrepreneurs and business owners.

We want you, the business owner, to really understand the numbers behind what is going on in your business.

We work with you either on a monthly or quarterly basis, not just providing the numbers to you, but helping you to be able to use them in a meaningful way in the day to day management of your business.

We do not charge by the hour (so we aren’t rewarded for being inefficient), but rather we charge a fixed price that you know up front for the value that we provide.

It’s a different conversation and the focus for both of us is where the value is (rather than ‘let’s be quick and get this over with’ under the archaic hourly rate model).

When you come to us, we will agree on a price for any work to be undertaken at the start, then agree to a monthly ongoing amount moving forward. If there’s anything that pops up along the way, we will always agree on a price before we begin.

Oh, and we do not charge for every little phone call and email – this is just part of a working relationship!

In fact 9 times out of 10 your investment in our Tax & Accounting service pays for itself in tax saved. Sometimes 5 – 10 x times over!

That’s taking money that otherwise would have gone to the tax man and putting it towards building a family first business. Woohoo!

p.s. the 1 out of 10 exception to this rule represent the startups who aren’t earning enough money yet to make a significant tax saving!

We’ve heard some pretty bad horror stories of old school accountants taking days, weeks and sometimes even months to get back to your questions.

Our response time to phone calls and emails is key number that we focus on – and we measure it in hours, live on our website.

We successfully keep this number less than 24 hours on average for our clients.

The dream that we are working towards is getting this response time down to zero. How? We’ve anticipated your needs so well, and provided so much proactive advice that you’d never have to email or call.

We’ll get there one day!

‘Turnaround time’ is another key number that the team measures closely.

We aim to have any urgent projects and work turned around within 10 business days, so that we’re able to achieve the outcome without ridiculous delays.

Like a workflow tango, turnaround time on your tax work is a two way street – we need you to work with us too when it comes to getting us the info we need on time.

Cloud accounting

The adoption of cloud accounting software is saving businesses thousands of dollars, and hours of bookwork every week.

We work with multiple cloud accounting providers and dozens of their add-ons but we believe Xero are the absolute best solution for small business.

As a result almost all our clients are use (and love!) XERO so our team know it like the back of our hand (Xero even certified Inspire CA as their Gold Partners)

Ultimately the smart use of technology is all about saving you time.

We go into a bit more detail on cloud accounting over here.

We’re big fans of throwing around ideas on a whiteboard in the boardroom. But what about for the in between time?

We use technology such as Zoom to enhance web meetings and to describe concepts and run scenarios from our computers. We can share our screens and run you through diagrams using LucidChart.

We’ve also adopted online signing software, DocuSign, which is a dream to get documents signed and lodged.

To be able to provide real insights to your business, we need to be in contact with you many times over a year.

Ideally, we would catch up in some form at least every month, but if that is too regular for your stage in business, we can also catch up on a quarterly basis. (Any less than every quarter and we can’t provide as much value to you.

We’re a team of 20 who punch well above our weight in terms of adding value. Amongst our team are chartered accountants, business owners & serial entrepreneurs, ex-bankers, bookkeepers, CFO’s & educators.

We also engage a global team of experts when we need some extra hands on deck.
Why don’t you come on over and I’ll introduce you to the team…

Inspire Accountants was founded by Ben Walker at the age of 23 with nothing but a borrowed printer, a laptop and a simple idea: what if, instead of just doing tax and reporting on history, accountants could give game changing advice that could help people write a better future for their business and their family?

Four years on, Inspire Accountants has been showcased as a global example of what an Accounting firm should be, thanks to Ben’s disruptive approach to throwing out timesheets & charging by the hour, his challenge of the traditional ‘old school’ model of the accounting industry and belief that Accountants change lives.

Ben is a winner of the coveted Anthill Online 30under30 award for 2014, was named a finalist in the Brisbane Young Entrepreneur of the Year awards and has been featured in many publications including the Courier Mail, Small Business Big Marketing Podcast with Tim Reid, Brisbane Business News & the Dent Podcast.

Today, while he continues to lead Inspire Accountants as CEO & Founder, Ben’s goal is to inspire others create a business that gives them the freedom to put family first and to make a positive difference in the world.

Budget $500 / month for our proactive tax and accounting service called “It’s all sorted”. We aim for this service to pay for itself in tax savings and in 2017 Financial Year our average tax savings per client was $27,000. That’s a 4.5x Return on Investment.

So my question to you is, is your accountant taking money or making money?

We are proud of our team of 20; 12 Accountants, 4 Admin team, 3 Marketing team, and 1 Executive Assistant.  Although we are small (compared to the faceless monoliths the founders used to work in before starting Inspire) we truly believe in the words of Margaret Mead who said “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” In fact in 2016 we were the ONLY accounting business to be named Top 100 Companies in Australia in the coveted annual anthill online Cool Company Awards.

Yes absolutely. We have access to a team of qualified accountants offshore who help us churn through all the low level data entry work. Unfortunately this outsourcing model is no cheaper to us than having more local accountants but it does enable us to be free of all the lower value transactional tasks, leaving us free to do higher level tax and profit strategy with our clients.

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