Sole Trader or Limited Company? The Pros and Cons

Sole Trader or Limited Company? The Pros and Cons

Plenty of people reading this will have thought about leaving their nine-to-five job, and starting their own business. It’s common to view this as a means of escaping the drudgery that so often makes up the work day. And then there is the freedom, and ability to be your own boss, and to do whatever you like. However, after moving beyond this initial stage of optimistic fantasy – it quickly becomes apparent that being your own boss is an awful lot of work. It is also hard to decide whether to start a company, or become a sole trader.

The following discussion outlines some of the primary pros and cons of being a sole trader, or creating the common “Pty Ltd” company.

Decision Making

A Pty Ltd company will need to run all decisions through its directors, in accordance the the Corporations Act. A sole trader can simply make decisions as they see fit, without worrying about what other parties think (within the law, of course).

Loan Security

A limited company can use its own assets as security for loans. However, directors are sometimes asked to give personal guarantees. Sole traders often need to use their own personal assets to secure loans, which can include their family homes.


How to Select the Best Business Structure for Your Company

How to Select the Best Business Structure for Your Company

Are you thinking of setting up your own business? If so, have you decided on the business structure which will be ideal for your new firm? The business structure of a company should be the first thing to be decided and confirmed, before you start putting your business plan into action. Your tax liabilities and payments, management of the business operations, legal identity in the market and consequent success depends on the structure you choose for your new entrepreneurial venture or company in Australia.

If you have decided to take the Australian industry by storm, then decide on the best structure for your business.

There are four main types of business structures which you can choose from in Australia, which are,

  • Partnership
  • Sole trader
  • Trust
  • Company

Each type has a distinct business structure and style, with linked legal requirements and liabilities which a company has to fulfill, or risk facing a legal action against them in court. It is therefore important that you learn everything about a business structure option before you select it.

Sole Trader

It is when an individual operates and trades his own company.  In such a business, the sole owner is wholly responsible legally, for all aspects involving the operations of his business in the market. He has to take care of all the debts and losses of the business, and this responsibility cannot be legally shared with others.

It is a simple and affordable business structure to start off a company in Australia. The sole trader makes all the decisions about the running and the starting of the business but can hire employees to help him out.