Unsure about the best structure for your business? Learn more about the key considerations.
Sole trader versus Pty Ltd – when is it time to change your business structure (and potentially save thousands)? In a cost-of-living crisis and high-interest environment, every dollar counts. And for the 1.5 million sole traders across Australia, there's a hidden lever that could potentially deliver serious financial relief: switching to a proprietary limited, or "Pty Ltd", company structure. Operating as a sole trader is simple and low-cost to start with, requiring a simple Australian Business Number (ABN) and very little paperwork, ongoing reporting requirements, and no need for a separate legal entity. It's a very tempting structure. But the moment your income climbs to a certain point, or you take on more financial complexity, that simplicity starts to cost you, in tax, in liability, and in lost opportunities. So when exactly is the right time to make the switch? Liability and Control As a sole trader, you may have full control, which feels nice. But, critically, you're also legally responsible for every aspect of the business's existence, including debts and losses. This is called having 'unlimited liability' and it means your personal assets are taken into account if you incur debts or have a court of law issue you with a financial penalty. The buck stops with you – and your possessions! This is why it's worth considering shifting to a Pty Ltd when your risk profile changes. For example, the simplicity of sole trader status can quickly become a liability if you…