How to Start a Business in Australia – Choosing a Business Structure (Sole Trader)

In my last tutorial in this series, we looked at one of the first steps in starting a business – ensuring that you have the right licences. Now it’s time for the next major step – choosing a “business structure”.

A “business structure” refers to the way your business is structured legally. And – just like licencing – it’s ABSOLUTELY crucial that you choose a business structure and actually register it.

It’s amazing how many people either don’t get this right, or skip this step completely. Don’t be one of them. Getting this wrong could destroy your business, and it could destroy YOU.

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But before we go any further, I need to remind you that any information presented on this blog is solely for informational purposes only. I make no guarantee that any of the information on this blog is accurate or complete. I cannot be held responsible for any loss or damage caused by reliance on any of the information or advice provided on this blog. If you are serious about your business, please consult a solicitor, accountant, or business consultant for advice. This blog is NOT LEGAL ADVICE! Any use of the information here is SOLELY at your own risk.
For more information about this, please read my disclaimer.
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Business structures are rarely explained well. Even some business books get this stuff wrong at times! Hopefully by the time you finish reading this series of articles you will have a much clearer idea about business structures, and which structure best suits your particular business. Remember, not all businesses will have the same business structure.

Types of Business Structures

Broadly speaking, there are four major types of business structures:

Arguably, the Sole Trader business structure is the most popular one – but it might not necessarily be right for you. Additionally, you may need to change business structures eventually, depending on the needs of your business.

But what do all of the four structures actually mean? In this article, we will look at the Sole Trader business structure.

Sole Trader

The first thing to realise about structuring your business as a Sole Trader is that YOU (and ONLY you) are the business.

In other words, YOU own the business, YOU are directly in control of everything, and all money you make with your business is YOURS. The business is NOT a separate legal entity to you.

That means that come tax time all income you make through your business is counted together with your own personal individual income (so that means it is lumped in with income you make from other sources too – such as a job you might have on the side). Having said that, you’ll still need to fill in some additional tax forms at the end of the financial year. The Australian Taxation Office (ATO) has more information about that here.

So, sounds good so far, doesn’t it? But what does this all really mean?

Advantages of a Sole Trader

Starting off as a Sole Trader is the simplest way to begin a business.

  • It’s easy to set up (I’ll tell you how shortly)
  • There is less paperwork (in comparison to the other structures)
  • It’s MUCH less expensive
  • There is less government interference and regulation (at least in comparison to a Company)
  • It offers more privacy (in comparison to the reporting requirements of a Company)
  • There is less need for hiring lawyers, accountants, and other consultants (at least in comparison to a Trust or Company)

Obviously, these are broad generalisations, but they tend to be true much of the time.

As a Sole Trader, you can still employ people, engage other contractors, apply for financing (although this last part might be more difficult compared to a Company), and do many other things. There is a lot you can do.

And when your business expands, you can always change this business structure more easily compared to other structures.

So, what’s the catch, I hear you say?

Disadvantages of a Sole Trader

Well, the major problem is that the business is YOU (no offence intended …). If you die or become permanently incapacitated, your business ceases to exist. Why? Because your business is YOU. It does not exist outside of YOU. So if you aim to pass on your business to other people in future (eg. family), this could be an issue. This area of the law is called “succession”.

This brings up a further complication, and one of the major weaknesses of this business structure.

Because the business is YOU, YOU are personally liable for any debts, negligent acts, etc that you commit while running your business. You assume ALL the risk and responsibility whether your business succeeds or not.

Every time you sign a contract with someone, it is YOU who is contracting – NOT your business. So if things go wrong, you could lose all your assets, your house, and your future. It’s a risk that you need to bear in mind.

Having said that, with the appropriate insurance cover, you might be able to lower your risks substantially.

Should I set up as a Sole Trader?

Obviously, only you can know that. This entire article is not intended as a full guide to the features of operating as a Sole Trader, but hopefully it gives you some idea as to where to go next.

Your decision whether to structure your business as a Sole Trader might depend on some of the following questions:

  • Do you have a lot of money to start the business with? Can you afford the expenses associated with setting up, and operating, the business as a different structure (eg. as a Company)?
  • Do you want the business to be a separate legal entity? If yes, then consider structuring it as a Company instead.
  • Does it bother you that your business will cease to exist upon your death or permanent incapacitation? If yes, then you may want to consider structuring your business as a Company instead.
  • Does the personal risk and liability issue concern you? Are you in a particularly risky industry where you may need greater protection (in addition to insurance cover)?
  • How have your competitors structured their own businesses? (a good way to find out is by searching for them on ABN Lookup)
  • Are the tax benefits greater than structuring your business as a Company? For example, as of writing, the tax rate on a Company is 30% (before tax is applied again to employee salaries). So depending on the rate of personal tax you might need to pay as a Sole Trader, sometimes it may actually be more effective to structure your business as a Company instead (which you would then become an employee of). This would be especially useful if you wish to use a lot of the profit to further grow your business, rather than adding it to your personal income (where the tax rate may be higher than 30%).

There are, no doubt, other questions that might also apply to you. But hopefully the above questions are a useful starting point.

So, how do I register as a Sole Trader then?

First of all, you need to decide if you want to run your business under your own personal name (eg. “Adam Wozniak”), or whether you want an actual business name (eg. “Wozniak’s Tools” or “Vandelay Industries”…). If you want to run your business under your own personal name (with NO other additions), all you need to register for is an Australian Business Number (ABN).

APPLYING FOR an Australian Business Number (ABN)

Regardless of whether you decide to run your business using your own personal name, or whether you register a business name, you must obtain an Australian Business Number (ABN) and a Tax File Number (TFN). If you have already been employed in the past (or are still currently employed), chances are that you already have a TFN. If you DON’T have one, you will need to obtain one through the Australian Tax Office (ATO). Click here to apply for a TFN.

To obtain an ABN, you will need to apply for it through the ATO too. Thankfully, these days you can obtain an ABN in about 30 minutes without even leaving your computer. Click here to apply for an ABN.

Registering a Business Name

If you want to operate under an actual business name (rather than your own personal name), then you MUST register the business name in your particular State.

UPDATE: In May 2012, a new national business names system commenced, replacing the old State system. This actually makes the process easier (and cheaper) than ever. The administration of all business names Australia-wide is now handled by the Australian Securities & Investments Commission (ASIC). To begin the business name registration process, just click here.

If you intend on operating your business in multiple States (eg. if you intend on having a physical presence there), then you will need to register your business name in every State where your business will be located.

Registering a business name in one State generally costs about $150 for 3 years. Naturally, if you intend on registering in more than one State, these costs will begin to add up quickly.

To find out more about the costs and paperwork required, please visit the relevant State office and look for “Business Names”:

Some notes to remember about registering your business name though:

  • You can’t register a business name that is already registered in your State
  • You can’t register a business name that is already taken as the name of a registered Company
  • You can’t register a business name that is already registered as a Trademark (eg. “Coca-Cola”, “Google”, etc)
  • Even if your business name partly contains your own personal name, you STILL NEED TO REGISTER A BUSINESS NAME. Eg. although I wouldn’t have to register “Adam Wozniak”, if I decided to add even ONE additional word that wasn’t part of my name (such as “Adam Wozniak’s Tools”), then I MUST register a business name. This is the part that MANY people get wrong!
  • Registering a business name is more about consumer protection than it is about protection for your business. In other words, registering a business name, in itself, does not necessarily give you any legal rights to your business name. It gives you less rights than registering your business as a Company, and it gives you even less rights than registering your business name as a Trademark. Basically, a business name has NO legal status in itself.

Despite all of this, registering a business name can be very quick and affordable. And there is a LOT less paperwork required compared to other business structures.

Once you have obtained an ABN, TFN, and registered your business name (if applicable), you need to ensure that your ABN is actually linked to your business name. By default, it might not be. To link your ABN to your business name, telephone the ATO on 13 28 66.

What if I don’t want to register as a Sole Trader?

So those are the basics of structuring your business as a Sole Trader in Australia. Naturally, it’s important that you also consider the merits of the other three major business structures (and especially if registering as a Sole Trader does not appeal to you). It’s important that you consider your options carefully.

Remember, selecting a business structure is NOT an optional step if you want to ensure your business has been set up PROPERLY and LEGALLY. Some groundwork now will save you a whole lot of potential headaches in future. Besides, having a business structure makes your business look more professional and reputable.

In the next tutorial in this series, we will be looking at another type of business structure – Partnerships (where you set up business jointly with others).

UPDATE: Please note that due to an overwhelming number of email enquiries and blog comments over time, I’ve had to disable all contact methods. I am unable to offer any further assistance or advice. If the above article hasn’t answered all your questions, I encourage you to look through the archived comments below. You’ll find frequently asked questions there. Thanks.

Related articles:

  1. How to Start a Business in Australia – Choosing a Business Structure (Partnership)
  2. How to Start a Business in Australia – Choosing a Business Structure (Trusts)

80 thoughts on “How to Start a Business in Australia – Choosing a Business Structure (Sole Trader)

  1. i checked it.., followed your rules and got myself an ABN! so if a mind like mine can do it.., anyone can. thanks for that Adam

    mirek :)

  2. Hi Adam,

    Very informative article! I’d set my business up just like this about 2 years ago, and your article has quelled my fears whether I had done it properly. Thanks for writing an article about law in such a summarised form.

    Sean.

    • Really well at the moment. Its just a part-time thing, but things have really picked up recently, its really good. It doesn’t seem that this recession stuff has had a whole lot of effect in the web industry.

      Thanks again!

  3. Thanks for the great rundown.

    I’m assuming a sole trader can’t have employees but can a sole trader contract someone to do some work?

    For example my daughter may do some graphic design work for some software I’m developing. Can I as a sole trader pay her for her work?

  4. Hello Adam,

    Thanks for your comment. Glad to hear this article has helped you.

    From what I understand, there is nothing preventing you from employing staff as a sole trader. The main restriction with being a “sole” trader is that YOU are the ONLY person responsible for the entire business – so you can’t have anyone else sharing that responsibility with you. And, obviously, the business is NOT a separate legal entity either.

    But apart from that, you can still do most other things as a sole trader. So you could certainly employ people – such as your daughter – either as employees, or as independent contractors (although, depending on how old your daughter is, you may need to take a look at any age restrictions involved with that).

    Using independent contractors CAN be more beneficial (especially when you’re starting out, depending on your industry of course). You then don’t have a lot of the paperwork nightmares that you would if you were officially employing people.

    If you ARE going to use contractors, then what you are actually doing is simply engaging OTHER “sole traders” who have their own ABNs too. The contractor is technically running their own one person business, just like yourself!

    HOWEVER, sometimes the law might determine that a contractor is, in reality, an EMPLOYEE. Take a look at the ATO’s info about this kind of situation: http://www.ato.gov.au/businesses/content.asp?doc=/content/00095062.htm&headline=Unsureifyourworkersareemployeesorcontractors&segment=businesses

    The above is, of course, just a simplified outline. I do encourage you to consult the relevant government departments. My article on licensing also might help:

    http://www.wecancreate.com/blog/legal-issues/start-business-australia-licencing/

    That post doesn’t specifically deal with employees, but you will find that if you use one of the BLIS web links, you will get access to the required paperwork you would need to fill out if you were considering employing people. There are many factors to consider, some of which include taxation, registering as an employer, workers compensation, superannuation, awards, etc. There can be complex Federal and State requirements for employing people.

    A good point to start would be to take a look at the following links:

    http://www.business.gov.au/BusinessTopics/employingpeople/pages/default.aspx

    http://www.business.gov.au/BusinessTopics/Independentcontractors/pages/default.aspx

    http://www.lawhandbook.sa.gov.au/

    You may have already come across those previously.

    And again, none of the above constitutes business or legal advice. But I hope it gives you a good starting point to commence your enquiries.

    Hope it helps!

  5. Hi Adam

    Great article – best i’ve found on net so far – I’m hanging out for the next one – trying to decide whether to open a trust or company.

    cheers Ange

  6. Hi Angela,

    Thanks for your comments. I too have found it difficult to find relatively comprehensive (but, above all, SIMPLE) guides to these things.

    My article on Partnerships is now available at http://www.wecancreate.com/blog/legal-issues/start-business-australia-choosing-business-structure-partnership/

    If you want information on setting up as a Company, please visit http://www.asic.gov.au/asic/asic.nsf/byheadline/starting%20a%20company%20or%20business

  7. Thanks so much for this information. I am just about to launch a business with a friend and we had tried to figure out how we will both run things under one name. This has answered my question and a partnership it will be. I will be spending a lot of time reading everything on this site. Thanks a million!

    • Hi Adam, I thought I replied to this but with pc problems I see it did not go through.

      We are starting an expo business that will incorporate direct advertising.

      We live in an area that is growing fast yet the networking side of being in a business does not work well here so we hope to introduce old business to new business and ultimately teach them that working together with like minded people can benefit a business, not harm it.

      By getting them together to show what the region can offer the public as a whole and teaching them how to network we can only improve our area.

  8. Hi ! I am in Australia only for 6 months, and I want to develop my old hobby in a business – I want to take pictures in a professional way for people (weddings, birthday party, festivity). I did this think in my native conuntry for 12 years. So, I want to be a Photographer, Sole Trader. I didn’t find the information if I need a licence for this activity in South Australia (I am in Adelaide now). So, please..could help me with a link…?

    I understood that I need my TFN (I will use only my name) but I don’t know how ATO find about me and that I started an activity?(for taxes…of course) It is necessary to sent an email to ATO, to anounce them in a way that I start a business?

  9. Hi Dyanna,

    For information about possible licenses you might need, check out my article on licensing at:

    http://www.wecancreate.com/blog/legal-issues/start-business-australia-licencing/

    Regarding your other question, beyond a TFN and ABN you generally don’t need to notify the ATO about your business. That’s basically the purpose of registering an ABN (so make sure you don’t forget to do that!). Then it will be up to you to ensure you complete the required business paperwork every year for your tax return.

    There are some good links at the ATO website that are relevant to some of the things you mentioned:

    http://www.ato.gov.au/businesses/entry.aspx?menuid=43539
    http://www.ato.gov.au/youth/content.asp?doc=/content/66884.htm
    http://www.ato.gov.au/corporate/content.asp?doc=/content/00199712.htm

    HOWEVER, there is, of course, the complication of you only being in Australia for 6 months (eg. I’m assuming that you’re just visiting, and aren’t an Australian citizen). That sounds like a potentially complex issue, so it’s not as simple as the above. If I were you, I would contact the Australian Taxation Office – http://www.ato.gov.au/ to ask them directly about what you need to do. This is not a straight-forward situation.

    You might also want to ask your local fair trading office. See my article on licencing to find out where your local trading office is. http://www.wecancreate.com/blog/legal-issues/start-business-australia-licencing/

    Hope that helps.

  10. Hi Adam,

    As someone who is just about to start my own business for the first time, I’ve been searching all over the internet seeking answers to my questions before I make my first trip to the accountants / lawyers as so I don’t sound like a total knuckle head when I get there. Your article on sole traders is the best & easiest to read that I have come across and has helped me enormously – so a big THANK YOU.

    Quick question whilst I’m here – so you are saying that as a sole trader, only when I was to have a physical presence in other states, I would then need to register additional seperate business names ?

    I ask as I am considering starting up as a Sole Trader firstly and the business I plan to establish is a consulting business whereby whilst I would be based in Victoria, I would be planning to deal with people & organisations in other states in Australia and ultimately ( & hopefully ! ) make plenty of sales in other states as well. As my one & only physical office would be in Melbourne, but I would be speaking to & dealing with people all over Australia – I only need to register one business name in Vic, but be OK to trade around the country ?

    Hope that makes sense & look forward to your reply.

    Cheers !

  11. Hi David,

    Thanks for your comments. Much appreciated.

    Regarding your question about registering a business name in every state you service, I think the answer depends. From what I understand, chances are that you only need to register a business name in the state where you actually have a physical presence (eg. an actual office).

    HOWEVER, this could vary from state to state (which is one of my pet peeves…). So to double-check this, you should contact your state’s relevant trading office. If you end up having to register a business name in several states as a result, it might just be better registering a Pty Ltd company instead.

    UPDATE: In May 2012, a new national business names system commenced, replacing the old State system. This actually makes the answer to this question easier (and cheaper) than ever. The administration of all business names Australia-wide is now handled by the Australian Securities & Investments Commission (ASIC). To begin the business name registration process, just visit http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Registering%20a%20business%20name

    Hope that helps.

  12. Hi Adam,

    Thankyou so much for this article. I have been searching the internet alot on the topic and just like the others before me i have found this to be the most informative and straight forward explanation.

    The question i have is, after initially setting up a soletrader, the business hopefully starts to do well and i decide that it is better to operate the business as a company, can i convert a sole trader to a company or do i have to start up a whole new buiness entity?

    Due to money and time constraints i find that a sole trader is an immediate option but the benefits of being a company might be more appropriate as the business grows.

    Regards,

    Angelo.

    • Hi Angelo,

      Thanks for stopping by. I’m glad you have found this to be one of the most informative and straight forward explanations.

      Regarding your question, it’s a tricky one. While going from a sole trader structure to a company structure is easier than converting some of the other business structures, it’s still something that you should consult an accountant or lawyer about – to make sure it’s done correctly. After all, changing over to a company structure is a pretty big decision, with lots of implications. An accountant or lawyer should be able to steer you through it.

  13. Hi Adam, i am looking at starting up as a sole trader ad your info above is great however i need to know more about how the payg tax and super is worked out. Can you help out with that or do i need to see an accountant?

    REgards
    alec.

  14. hi adam,

    thanks for the info.

    i have just completed a massage course and am in the process of setting up an abn, insurance & all that, so that i can be a sole trader..

    i haven’t done anything like this before, so i thought that i would try & suss it out on the net to see if i’d missed anything & you’re blog easily goes through each point to think about.

    one question that you may be able to help me with is, i am not sure if i am required to set up a separate bank a/c for the business.. i spoke to my bank the other day & they told me that i did for tax reasons, what do you suggest?

    i was thinking to just have a separate one, so that when tax time came around, it would be easier for me to print off a succinct summary of transacations, etc..

    thanks & regards,
    liam

    • Hi Liam,

      Thanks for reading, and I’m glad to hear this article has helped.

      As for your question about separate bank accounts – you are correct. You should definitely have separate accounts. It might not necessarily be a strict requirement for a sole trader, but it would be extremely unwise to mix your business income with your other income and expenses all in the one bank account. It would just make tax time a total nightmare for you. In fact, I can’t think of a single reason why someone would choose to mix funds instead of having separate accounts. It just wouldn’t make sense.

      Much easier to just keep separate bank accounts, which also means you always have a quick and easy way to check out the financial health of your business whenever you need to. Also makes printing out summaries, etc much, much easier.

      Additionally, this guide from the ATO about record keeping might be helpful to you:

      http://www.ato.gov.au/businesses/content.asp?doc=/content/76494.htm&mnu=43668&mfp=001/003

  15. Adam,

    which types of marketing can a sole trader use?
    I meant legally allowed?

    Thanks
    Regards
    Ada

    • Hi Ada,

      Thanks for posting.

      I’m not sure what you mean though. Can you elaborate?

      Remember, though, that just because you’re a sole trader doesn’t mean you can’t employ people, or advertise and market your business. You can, of course, do all of that. Being a sole trader does not affect that at all.

  16. Hi Adam’
    Thanks for your very informative article. One question; do I really need a business name if there’s not a need to advertise the business. I’ve actually set up one now but can I amend it to trading as my own name once the 3 years expires to save costs?

    • Hi Annie,

      Interesting question. Thanks for posting.

      > do I really need a business name if there’s not a need to advertise the
      > business.

      Depends. If “branding” your business isn’t a high priority, then probably not. If you feel there is no disadvantage to just trading as your own name, then by all means continue doing so.

      Obviously, you’ll still need to keep your ABN, but you won’t need to re-register a business name in future, should you wish to resort to using your full name instead.

      Obviously, do double-check this with your state’s fair trading office though, just so you can confirm what procedure (if any) you will need to follow once the 3 years are up.

      UPDATE: As of May 2012, States no longer administer business names. Visit ASIC instead at http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Registering%20a%20business%20name

      Hope that helps!

  17. Hi Adam
    Just a question l am a mechanic who has been working on a casual basis a person who has a one man workshop. He has now asked me to get an abn and work as a sole trader. Can l do this become a sole trader and work only for the one person. He wants me to invoice him weekly for my hours and that
    he will pay them yes on a higher rate than what l was on as a casual. To work out an hourly rate l would have to take into consideration my superannuation, taxation, insurances, and sick/holiday pay. I am not sure what percentage l should put on to cover these payments. Also Adam as a mechanic working in his single bay workshop do you know what type of insurances l would require. Is this worth me venturing this way or think about finding employment elsewhere.
    thanks
    Kevin

    • Hi Kevin,

      > Can l do this become a sole trader and work only for the one person.

      This can be a tricky area. It’s possible that your former employer wants this arrangement because it will be easier for him to manage (and possibly cheaper).

      However, the law might still determine that you are an employee – rather than a contractor. It really depends on the individual’s circumstances. Take a look at the following web links for more info:

      http://www.ato.gov.au/businesses/content.asp?doc=/content/00095062.htm
      http://www.business.gov.au/BusinessTopics/Independentcontractors/Pages/default.aspx

      As for how much you should charge, that is something you will need to work out. As you point out, there are a lot of things you’ll need to factor into the hourly rate so that you’re not actually worse off than you were as a casual employee.

      Regarding insurance, I would suspect that it would be your former employer who would need to ensure that his insurance covers your presence at his workshop. But, in addition, you might need to consider some sort of personal insurance for yourself too – in case of any accidents, sickness, etc.

      If in doubt about any of the above, I suggest you talk to an accountant, lawyer or business advisor. You might also want to make an appointment with your local Business Enterprise Centre for some further advice. I believe they offer free sessions:

      http://www.becaustralia.org.au/

      Hope that all helps!

  18. Hi Adam,
    Great article. I do have one thing to ask that Im not sure about. If I become a sole trader, then want to register a company is there any hassle going from one to the other?
    Thanks so much
    Suzanne

    • Hi Suzanne,

      Thanks for your comments. Glad you enjoyed the article.

      In response to your question … while going from a sole trader structure to a company structure is easier than converting some of the other business structures, it’s still something that you should consult an accountant or lawyer about – to make sure it’s done correctly. After all, changing over to a company structure is a pretty big decision, with lots of implications. An accountant or lawyer should be able to steer you through it.

  19. Hi Adam,

    A very useful and good details article. Thanks for sharing it. I am new to ABN thing and thinking to set up one as a Sole Trader, but I have few questions to ask if you don’t mind to answer them. I am a full time employee and wanting to do a 2nd job by providing software training (as an training instructor) at an educational institute for just few hrs (3-6 hrs) per week. I have been told to get an ABN by the institute.

    Q1. Do I really need to have an ABN? If so, is Sole Trader good enough for me? If not, what options may I have for invoices/payments & tax purposes?

    Q2. I was told I can reduce my tax for this 2nd job if I registrer/use a lower personal tax income earner (eg. my wife) ABN. Is this right? Can I register my wife’s ABN and use it for myself? If not, could you please advise how can I reduce the tax as this will be just a small job and I wish not to have my personal income tax rate applied here.

    Q3. Any fees to pay to have a Sole Trader ABN?

    Much appreciated for your inputs and thanking you in advance.

    Thanks and Regards,
    Andy

  20. Hi Andy,

    Thanks for reading. I will do my best to answer your questions, but some I might not be able to answer:

    1) Short answer – most likely. However, you CAN trade without an ABN, but if you do the institute you want to work for will have to withhold a certain percentage of your payment to cover tax (46.5% in fact!). Having an ABN means that they won’t have to do that, and tax becomes YOUR responsibility instead. Here’s some more info from the ATO about that: http://www.ato.gov.au/businesses/content.asp?doc=/content/50568.htm&pc=001/003/021/001/004&mnu=43096&mfp=001/003&st=&cy=1 and also http://www.ato.gov.au/businesses/content.asp?doc=/content/57752.htm&pc=001/003/074/002/002&mnu=&mfp=&st=&cy=1

    2) The first part of your second question sounds very dubious. I’m not sure why someone would have told you that. Besides, the whole point of an ABN is that it is directly connected to YOU. So you can’t use someone elses’ ABN, and if you did, I suspect you would have some trouble down the track (ie. fraud for one!).

    Regarding “reducing your tax”, you really should see an accountant about these sorts of matters. Having said that, one of the main benefits of being a sole trader (or ANY business, for that matter), is that you can make deductions for certain purchases that you make for your business. This way you can lower the taxable income. But there are very specific rules about the sorts of deductions you can claim so, again, it’s best to speak to an accountant. Also, the Australian Taxation Office has some good info about this too – http://www.ato.gov.au/businesses/

    3) Registering an ABN doesn’t cost you anything – except for maybe 30 minutes of your time.

    Hope the above helps. Again, none of this is business or legal advice, so if in doubt, I recommend you make an appointment with a professional.

    Good luck!

  21. Hi Adam,

    Thanks a lot for your response. Yes, your answers help. Much appreciated.

    I will soon register my ABN, but for now a friend of mine has offerred me to use his company ABN temporarily for my current purposes with no commissions/fees/etc, so I am going to take this favour. My understanding is that I will be just a sub-contractor to his company and the tax rate should be just as my normal full time income tax rate. Could you please share some tips or anything (pros & cons) for using someone’s company ABN?. I do not have to pay double tax, right – ie. company tax & individual tax?

    Again, your inputs & useful information would be very much appreciated.

    Thanks & Regards,
    Andy

  22. Hi Adam,

    thanks for the straight forward information you have provided. I am about to start a small part time business (sole trader). I will be applying for an ABN and probably have the Business name as my own name for simplicity.
    I will be setting up a separate bank account and plan to keep it simple and just open a personal bank account rather than a Business bank account – do you know of any issues doing this?
    Appreciate your input.

    Thanks
    Michelle

  23. @Andy – From the sounds of it, either your friend is offering you his ABN to use as your own (which, as I mentioned before, is not actually allowed), or he is simply engaging you as a temporary contractor without asking you for your ABN – in which case, as mentioned, he will have to withhold 46.5% of your salary for tax purposes. If you don’t want that to happen, just register for your own ABN. It’s free, and it only takes about 30 minutes to do it online.

    @Michelle – thanks for your comment. It doesn’t sound like there would be any major issue with that (especially since you are intending on trading in your own name anyway). Having said that, at the very least I would encourage you to discuss this with your bank or credit union. There might be some benefits to having a separate business account regardless (at the very least it would probably help you keep good records for your business, and not mingle funds from different sources).

  24. Hi Adam,

    Great article and thanks for taking the time to answer everyone’s questions!

    I too have a question. I run as sole trader and I really need some extra hands to help out, I assume I will need to engage some independent contractors with ABN numbers, however the type of work is manual, medial and season, it’s not long term or career oriented and suspect those who have expressed interest in the work will be deterred by the extra obligations they will carry if they have to set themselves up as sole trader / contractors. It’s the type of job suited to uni students or travellers, people who are look for some simple short term work.

    Are there any alternatives to contracting in this way? Other than going down the path of full employee status? How for example do farmers / orchids handle the people they engage to pick fruit? I would liken my situation to theirs.

    Thanks again,
    Paul.

  25. Hi Adam,

    What happens with the transition if a business I am investigating to purchase is currently run as a sole trader?
    Are there any transition issues?

    Also, I noted that the current owner doesn’t have the business name registered (on ASIC or Fair trading) and someone else does in another state (through ASIC), could this become an issue?

    I am a little confused, as a sole trader if you want to register a business name, do you register on the Fair Trading site and if you are a company do you use ASIC?

    Thanks!
    Shaz

  26. Hi Paul and Shaz,

    Thanks for your comments.

    @Paul – Sounds like hiring them as casuals might be the way to go. Having said that, don’t let them overestimate the amount of work required to set themselves up as a contractor. Essentially, they really only need an ABN in their own name, and that takes about 30 minutes to do online (if that). Otherwise, any other type of arrangement they make will result in them getting less pay, since you’ll have to set aside part of their wages for tax purposes (which they probably won’t like!). I’ve simplified the situation quite a bit here, so I’d suggest you speak to an accountant, lawyer, or some other business consultant about your specific situation. But I hope the above is a helpful starter.

    @Shaz – I think you probably need to find out just what it is you’re actually purchasing in this situation. After all, you mention that this person hasn’t even registered their business name! And if they’re a sole trader, they can’t actually “transition” themselves to you. So what you’re really purchasing is the premises, business, customers, goodwill, etc around all of that. But it’s curious if they don’t even have a registered business name … are they even on the ABR register under their own personal name?

    By the way, just because there is a sole trader in another state using the same business name, doesn’t necessarily prevent you from registering the same one in your state. HOWEVER, you need to be extremely careful here. There could be various intellectual property issues there, and if you’re serious about making a good business purchase, I would strongly recommend discussing all of this with an accountant, lawyer, or business advisor ASAP. You don’t want to end up buying a legal problem!

  27. Thanks Adam,

    Yes they are on the ABR register in their own name..
    Yes so the sale would be the client list, domain, website, and existing relationships (which of course have risk too).

    I’m wondering if the business name needs to be registered?

    Thanks
    Shaz

  28. Thanks heaps Adam, good concise info. Am I right in thinking that if I am running my business online only (in NSW) that I do not need to register my business name even if it is different to my own personal name??

    I already have my ABN, got it ages ago and have never actually used it. It has my entity name and then my T/A name.

    Ella xx

  29. Shaz – generally speaking, a business name should be registered (whether it’s being run under a sole trader, partnership, or company structure). Perhaps you should ask the business owner why this was never done in the first place?

    Ella – thanks for your comments. As mentioned in the article, if you’re trading under a name that is NOT your personal name, then you should register the business name.

  30. Hi Adam,

    It’s great seeing someone help all these people…. great work

    Question time… I’m a qualified electrician currently working trying to start a printing business on the side.
    I’ve been advised to start as a sole trader but not register for gst which I understand but need advice in regards to order process.
    Q1. Do I register for an ABN before I register a business name?

    I have spent lots of time trying to figure out a business name and found one I really wanted, after searching it on the net found it was registered in QLD. Since then been researching more to see if I can still use the same name in VIC and I’m still unsure. I want to have the same web address as my business name and that web address is not taken in AUS although it is in the US (.com not .com.au) but I don’t think that is really revelant as my target market is AUS based
    Q2. Can I register that business name? Or who can I contact to find out?

    The printer I purchased can print on different media eg canvas, vinyl, paper which I want to take full advantage of… I want to concerntrate firstly on turning photos into canvas prints but have a friend running a sign business who I will get constant work from for digital vinyl printing. I’m worried I will lose potential clients if I try to combine one website trying to cater for these totally dirrent services
    Q3. I’m thinking for business/adverising purposes is it best to register one ABN in my name and then having different business names and websites for each target clients?

    I have lots of questions to ask but tried not to overload you with complicated questions your going to send me to an accountant, lawyer or business adviser for… I’m hoping this genie will grant all three wishes!!
    Thanks in advance Chris

  31. Hi Chris,

    Thanks for reading, and thanks for your kind comments. I do what I can to offer people some help on here, but – obviously – I’m not always able to provide specific assistance.

    As for your questions, I’ll try my best to answer them:

    1) You mention that you found the same business name registered in QLD (and you’re in Victoria). Firstly, make sure that the other business name is still active. If it’s not, it might not be a problem. If it IS active, however, you might be prevented from registering the same business name, even if it’s in a different state. From what I’ve heard, different states seem to differ on their flexibility in this sort of situation. Regardless, best thing would be to contact them directly and ask.

    Having said that, do be aware that even if you are allowed to register the same business name in your particular state, you need to be careful that you haven’t infringed anyone elses’ intellectual property (eg. a trademark, etc).

    UPDATE: In May 2012, a new national business names system commenced, replacing the old State system. The administration of all business names Australia-wide is now handled by the Australian Securities & Investments Commission (ASIC). They have information about business name registration at http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Registering%20a%20business%20name

    As for registering an ABN – it’s probably best to do that BEFORE you register a business name, since you will have to link your business name to an ABN.

    2) Regarding the website issue, it’s a good point about being concerned about trying to cater for too many types of audiences. Perhaps it might be better to not mention certain services, especially if – in the example of digital vinyl printing – you intend on doing that solely for your friend (rather than the public) who runs a sign business? If that’s the case, is there any point in promoting that service specifically?

    Just a thought. I’m not saying that’s the right way to go, but – as with every type of business – it’s important to narrow down your target market as much as possible.

    3) That could be a good, alternative option – as long as you’re happy with the increased costs associated with registering a number of separate business names – if you do, indeed, believe that the services you offer are too different to be featured all on the one website.

    Anyway, hope the above thoughts help. As always, none of the above is legal advice, but I hope it gives you some more things to consider.

    All the best!

  32. Hi Adam,
    i can’t thank you enough for this article. btw i’ve a question for you.
    i had a ABN 5 years ago. but i never held a business in all these years. never registered or activated.
    will this ABN still be there? or should i have to re-apply & get a new one? where can get info on this?

    Thanks&Regards
    Guru

  33. Hi Guru,

    Thanks for your comments. Glad to see the article has helped you too.

    As for your question, tough to say. I’ve known people who were in a similar position to you, and they were able to just continue with the same ABN.

    On the other hand, I also know of people who hadn’t done anything with their ABN for a year, and then they received a letter from the ATO telling them that their ABN was going to be suspended since it didn’t seem to be used. They then had a bureaucratic nightmare that took a while to resolve.

    If you never received a letter from the ATO cancelling your ABN, then there’s a chance your ABN is still active. Visit http://www.abr.business.gov.au/ and search for your name (or ABN, if you remember it). The search result will tell you whether your ABN is active or inactive.

    If that doesn’t work, contact the ATO – http://www.ato.gov.au/ – and just be honest about your situation.

  34. Hi Adam!

    Thanks for this article, together with a friend of mine (two sole traders) we are thinking of registering a buisness name and using the same name for our seperate work. From legal point of view does that sound fair dinkum? Obviously we would do our own taxes, both have seperate ABNs etc.

    If possible, whilst regestering our name (via the consumer protection website) do I use my ABN, both or none?

    Big Thanks

  35. Hi Adam

    I am starting a custom made dance and activewear business and want to use the business name ‘Stretchy Stuff’. It has taken a while to come up with this name so I was disappointed after searching on the net to find a company in the UK that already uses this name. This company has an up and running website under this name. My question is do you know if I can use this name in Australia because because my plan would be to go on line at some point in the future as well.

    Hope you can help.

    Thanks

    Liz

  36. @Piotr – In response to your questions, you can’t “share” a business name between two sole traders. If you want to do that, then you’re probably best considering a partnership, or a company structure. If you haven’t read my article about partnerships, feel free to take a look at http://www.wecancreate.com/blog/legal-issues/start-business-australia-choosing-business-structure-partnership/

    @Liz – That’s a tough question, and you’re really dealing with potential intellectual property issues there (possibly trademark infringement). In any case, visit http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Registering%20a%20business%20name for more info about the things to consider when registering a business name.

  37. Thanks for your answer Adam. I agree that I would probably be treading on some toes if I used that name so will now use my second preference which isn’t as catchy but will have to do. Thanks so much for your help.

    Regards
    Liz

  38. Hi Adam
    Interesting articles and excellent information – as it is a minefield when you read all the information that is out there.

    I have a question that is pretty straightforward, but I can’t seem to get my head round it! My daughter is setting up a part time business – where she is required to have her own ABN for the modelling; bar; and graphic design jobs that she gets contracted to do.

    1. If she sets up as a Sole Trader and gets an ABN no – and sets the ABN name as Cat Designs – does she still need to also set up for a Business Name and pay the fees for 3 years?

    I think I am getting confused with the ABN name and some where they state “trading as” – and the more I read articles the more I am getting confused.

    Thanks for your help
    Trisha

  39. Hi Trisha,

    Thanks for reading, and thanks for your comments.

    In answer to your question – if a person wants to trade under just their own personal name (eg. “Adam Wozniak”), then they DO NOT have to register a business name. Just an ABN (Australian Business Number) is all they need (which is free).

    But the moment a person wants to trade under (“trading as”) any other name (that ISN’T their personal name), then they MUST register a business name (and pay the associated cost for 3 years).

    That’s all there is to it. Hope that helps clarifies things.

  40. Hi Adam,

    I currently work full time, but am looking at starting a small side business. I have registered my business name, but I am unsure if I need to have an ABN and pay tax on sales?

    Thanks.

  41. Hi Nadine,

    Thanks for reading. Yes, you should have an ABN, and then ensure your business name is linked to it. A business name MUST be linked to an ABN.

    What did you mean by “do I need to pay tax on sales”?

  42. What a great service you do for people like me, I have just branchout into a Telco business and have found your website invaluable.

  43. Hi Adam,

    Your article is very helpful and informative, I’m after some advice. My partner and a friend of his are looking to start a new business in Australia. They both have full time jobs and would like to conduct their business on the side for as long as possible, being that they are friends they are not completely comfortable with the partnership approach and as they would like to initially use the majority of their profits to pay off some debts they are not too sure a company structure will allow for enough dividend. I am wondering if they should just both register as sole traders and work independently until they get their feet off the ground or is there some other solution you may be aware of?

    Really appreciate your help, thinking about this has been giving me a headache!

    Susie

  44. Hi Susie,

    Do you mean they want to start one business TOGETHER? If so, the main options are either a partnership (as you’ve indicated), a company structure, or some complex system of trusts. Otherwise, perhaps they might be able to operate their own separate businesses, and form some sort of joint venture.

    Either way, it’s probably worthwhile that they make an appointment with a lawyer or business advisor.

  45. Hi Adam,

    Very informative. I do have a couple of questions: If you are registered in Victoria and you have an internet business can you trade in other states? or should you Register in every state? (even if you do not have a physical presence in any other state other than victoria?)

    And secondly, if you’ve work previously your existing TFN will suffice. You do not need to get another for the business?

    Thanks
    Michael.

  46. Hi Adam,

    Thanks for this! As expected the community provides better information than the tax office!

    I work full time and am considering registering as a sole trader so I can take on extra freelance work. At present there’s a possibility I won’t be deriving any income from this activity but I want to register now so that the option is there and also so I can register a web domain for the future when I am more likely to be actually trading. Is it advisable to register? Are there likely to be tax related costs even if I’m not making income? Thanks again for the post and for any advise you can offer! I see this blog must keep you busy!

  47. @Michael – That’s a good question re: whether you need to register in every State if you’re trading online (but from one specific location). I think the answer depends. From what I understand, chances are that you only need to register a business name in the state where you actually have a physical presence (eg. an actual office).

    HOWEVER, this could vary from state to state (which is one of my pet peeves about our system in general…). So to double-check this, you should contact your state’s relevant trading office. If you end up having to register a business name in several states as a result, it might just be better registering a Pty Ltd company instead.

    UPDATE: In May 2012, a new national business names system commenced, replacing the old State system. The administration of all business names Australia-wide is now handled by the Australian Securities & Investments Commission (ASIC). They have information about business name registration at http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Registering%20a%20business%20name

    @Pat – Thanks for your kind words. Generally, it’s a good idea to register early, as long as what you’re doing constitutes a “business”, rather than a “hobby”. At this point, it’s probably a good idea to look at the ATO’s info about this at http://www.ato.gov.au/youth/content.asp?doc=/content/66884.htm and http://www.ato.gov.au/individuals/content.asp?doc=/content/66241.htm&page=7&H7 and if you’re still unsure, probably best to speak to someone at your local fair trading office, or local Business Enterprise Centre – http://www.becaustralia.org.au/

    Hope that helps!

  48. Hi Adam.

    Thanks for a very informative article. Hope to hear from you re. my question

    I have already registered a Business name despite starting the business as a hobby. I will get an ABN soon.Do I need to always quote ABN even if deals are done as a hobby?

    Thanks

  49. Hi
    Thanks for this info. So if I am a French national wanting to open a restaurant in Perth, who do I contact first to start this business. I know I will need to apply for a temporary business visa, once this has been granted then apply for a TFN and ABN no and register as a sole trader with business name. Is this correct?

    Thanks

  50. Hi Sir/Madam,
    I applied for a ABN and business name with ATO as a sole trader last year. Now I decide to run my business under my personal name and save $150 for every three years. My question is, should i register my business with state government?

    Thanks

    Chuang

  51. @Maita – Thanks for your comment. Glad to hear this article was helpful. As for your question – “Do I need to always quote ABN even if deals are done as a hobby?” That’s a tough question, and it really depends on your individual circumstances. However, it begs the question why you registered a business name and ABN if you don’t believe you are running a business in the first place? You probably can’t have it both ways. At this point, it’s probably a good idea to look at the ATO’s info about this at http://www.ato.gov.au/youth/content.asp?doc=/content/66884.htm and http://www.ato.gov.au/individuals/content.asp?doc=/content/66241.htm&page=7&H7 and if you’re still unsure, probably best to speak to someone at your local fair trading office, or local Business Enterprise Centre – http://www.becaustralia.org.au/

    @Annah – Thanks for your comment. Your situation sounds a bit more complex. I would suggest contacting the ATO in the first instance, and seeing what they suggest you do – http://www.ato.gov.au

    @Chuang – Thanks for reading. What do you mean by “register my business with state government”? If you already have an ABN and a TFN, and you will be running your own business under your personal name to start with, then there’s no other “registration” you’ll need, unless you need to register for things like GST, PAYG, workcover, etc.

  52. I am wondering if you have to say what exactly the business does? I am looking to becoming a sole trader to be able to help out a friends business when he gets busy and also to do my own thing.

  53. Hi Graham,

    As part of filling out the required paperwork (eg. ABN, Business name registration, etc), yes – you will need to mention what services your business provides.

  54. Hi Adam
    I must say that you did a great job. Thanks for sharing your knowledge and experiences.
    I am very clear that, for me, sloe trader is the best option at this stage. Just a quick question regarding the name. Can I register an actual business name using “Pty Ltd”?

    Cheers

    Claude

  55. Hi Claude,

    Thanks for reading.

    > Can I register an actual business name using “Pty Ltd”?

    No, otherwise that would defeat the purpose of the company structure (which gives you the Pty Ltd). And it would also mislead your customers, which is why this kind of system has been put in place.

  56. Hi Adam,
    I am the biggest fan of your blog:) great job!

    I still wonder about the structure of the business, that’s why here is one question:
    is it possible to sell my business if I am a sole trader?
    if no, is there any way to do that?
    for example : to create own brand name and then sell it… what do you think about that?

    your response is highly appreciated.

    Tom

  57. Hi Tom,

    Thanks for reading.

    Yes, you can sell your business (eg. property, premises, etc), but selling the “business name” is not always a simple matter. As a sole trader, you cannot sell “you”. So things like that depend on whether you have certain rights associated with your business name – the sort of rights that you can get from trademark registration, as an example.

    Of course, I’m simplifying the above matters greatly, so it’s best if you speak to an accountant or lawyer for any specific issues like this.

    Hope that helps.

  58. Hi Adam,

    one question regarding two names of the business:
    can have 2 or more business names under one ABN? for example: Tom’s bananas and Tom’s tools
    thank you
    Tom

  59. Hi Tom,

    Generally speaking, you should be able to register more business names under one ABN. So then you are “trading as” whatever business name you have for a particular area or industry.

  60. Hi Adam

    Thank you very much for this very informative article. It was looking just for that. The links you provided earlier to the ATO were particularly helpful.
    For now, I think I’m not ready for a business or even a sole trader with ABN. It’s more of a hobby without any income, really, but might turn into something more.
    In comparison to what some other people in the comments wrote, who didn’t want to look for a business name, I enjoy playing with words and came up with a few ideas for a name, all of which don’t seem to have been registered, yet. Do you have a suggestion how to best proceed? I guess registering a name without a business isn’t possible? If I want to create a web site with the name, can I do this without business name? But somebody else might come along and register the name and use it for himself?

    Thanks again for your time, especially replying to all the comments!

    Ben

  61. Hi Ben,

    Thanks for reading, and for your kind comments.

    As for your question, you could potentially register a name as a Trademark, which gives you far greater rights to the name than a simple business name registration does.

    However, even with Trademarks, you have to be able to prove that you’re actually using it (ie. using it to sell goods or services). More info here: http://www.ipaustralia.gov.au/get-the-right-ip/trade-marks/

    Which reminds me – make sure you also search Trademark databases when trying to come up with a “brand” name. More info here: http://www.ipaustralia.gov.au/get-the-right-ip/trade-marks/search-for-a-trade-mark/

    Lastly, bear in mind that if you register a website using a name that you haven’t registered as a business name or TM means that, somewhere down the track, someone who DOES register that name might have a claim to your website address (presuming they don’t already!).

    These are complex areas though, and you’re really best off speaking to a intellectual property lawyer if you’re concerned about that sort of thing.

    Hope that helps.

  62. Hi Adam

    I am a contractor as a marketing consultant which derives 100% of income from one company. Of course the intention was to contract to several businesses but currently that is not the case, or at least over 80% of my income is from one source. I charge an hourly fee and provide an invoice based on timesheets. So the invoice amount can vary from week to week. I have an ABN and TFN. I work from the office and from home and do not get paid for sick leave or annual leave. I thought I fit under the “Personal Services Income” rather than as a sole trader. I currently do not pay myself any superannuation but am registered for GST since I earn over the threshold and do my own BAS and PAYG for tax purposes. The business I contract to covers me in their public liability, workers comp and payroll tax.

    Im confused as to registering myself as a company since it looks like I come under the “employee” status – clearly I would be at a disadvantage. I do not employee anyone else – its just me and I have no intention of selling the business. In moving to a company as a single employee what exactly will change for me?

    Is their a way I can retain the status quo?

  63. Hi Toula,

    Thanks for reading.

    My blog is only intended to provide general information. You’re best off speaking to a lawyer/accountant about individual circumstances, especially ones as potentially complex as that.

    Money spent on a lawyer/accountant at this stage of the process will be money well spent.

  64. Hi i am starting a new job with Australian container uploading group as a contractor. I have to have an ABN though. I have gone online but find it difficult to understand. i just need the ABN to receive the full amount of pay. I would be a independent contractor.So do i apply as the sole trader or what would i come under? Also how long will it take for my abn to be sent out to me so i can commence work?

    Thanks for your time. Sorry for asking such basic questions.

  65. Hi Frederick,

    Thanks for reading.

    > So do i apply as the sole trader or what would i come under?

    Yes, you would be a sole trader in this kind of basic example – trading under your OWN name (rather than registering a separate business name).

    > Also how long will it take for my abn to be sent out to me so i can commence work?

    If you do it online, I believe you should be able to get your ABN straight away. How long it takes before you get the official letter in the post, and how long before you officially get listed in the Australian Business Register is another issue altogether. Still, you should be able to at least get the ABN quickly – which is the most important thing.

    Hope that helps. Good luck!