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Ballarat Accountants: Sole Trader v Company

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at or 1300 328 855

Sole Trader v. Company 

Companies and sole traders have different tax, reporting and legal obligations. If you are thinking of switching from a sole trader to a company, you must compare the costs, liability requirements and obligations for both business structures to help you decide which one is right for you. 

The sole trader business structure requires fewer set up costs such as business name registration fees and bank account fees. Obtaining an ABN is free. The company business structure is more complex and comes with higher set up costs such as company name reservation, company and business name registration fees. You may need to pay bank account fees too but like the sole trader, obtaining an Australian business number is free as well.

In terms of record keeping, a sole trader generally requires less paperwork. Business income and expenses go to the individual tax return through a separate business and professional items schedule so you do not have to lodge a separate tax return for the business. Financial records and tax returns must be kept for five years and government agencies must be notified of any business changes within 28 days.

Sole Trader v. Company 

A company requires more paperwork and higher running costs. It must lodge its own tax returns and keep records for a minimum of five years. Financial records must be kept for at least seven years and must explain transactions and the performance and financial position of the business. They must be true and fair and be ready for audit anytime. They are subject to annual review by the ASIC. Records must also show compliance in other requirements such as a registered officer, a principal place of business, regular company meetings and a written record of meetings and resolutions.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at or 1300 328 855

As a sole trader, the ATO treats your business income as your individual income so you are responsible for any tax that your business must pay. You can claim deductions and withdraw money from your bank account. Meanwhile, the company’s income belongs to the company, not the owner. As a director, the company may pay you director’s fees or wages but you are not allowed to draw from the company. The funds you receive from the company must show on your individual tax return.  

Sole traders are personally liable for the debts of the business as there is no division between personal and business assets. Personal assets can be used to pay business debts. The company, on the other hand, is liable for business debts but personal assets may also be at risk if you’re a company director and the company cannot pay its debts. Directors are personally liable for PAYG withholding and superannuation debts. A company can own assets and properties and may sell these to pay for its debts.

Sole Trader v. Company 

As a sole trader, the type of insurance you need is based on your business activities – if you sell products or services or if you have employees. Your insurance can cover personal injuries, disability and death but sole traders are not covered by workers compensation insurance, which is required if you employ people. The same goes for companies. Directors and officers liability insurance is not required but directors may consider getting one. Directors are not liable for the debt of a WorkCover claim but the company is.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at or 1300 328 855

Sole traders have full control over their business so they are personally liable for all aspects of the business. In companies, directors control the business but certain decisions must be recorded as resolutions of the company. Directors govern the internal management of the company in line with the company’s constitution or replaceable rules. Directors must act in good faith, in the best interests of the company and exercises due diligence. They must prevent the company from trading while insolvent and report to the liquidator on the company affairs when closing.

Sole traders also need to update their business name annually. Companies have annual review dates when ASIC will issue an annual statement and invoice so the entity will remain registered. Both sole trader and company business structures can employ staff.

Ballarat Accountants

As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.

You can click here to speak to a businessaccounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.

We would love to help you formulate investment strategies and streamline your processes to take your business to the next level.  Our goal is to help you grow your business, find ways to invest more and increase your productivity.

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Phone: 1300 328 855
Office Address: 
902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354

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Phone: 03 97444522
Sunbury Office Address: 
Suite 13, 33-35 Macedon Street, Sunbury, Victoria 3429, Australia
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Postal Address: PO Box 270 Gisborne Victoria 3437




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