What is a sole trader?
A sole trader is someone who operates their own business and is personally responsible for all aspects of the business. It’s one of the simplest ways to set up a business, as sole traders are allowed to trade under their tax file number and generally have less reporting requirements than a registered company. As a sole trader, you’ll have full control over your business decisions, however it also means you’re personally liable for any business debts.
When choosing a business structure, consider both the current and future needs of your business. Your business structure may impact the tax you pay, your costs and the level of protection you have.
Do you need a business bank account as a sole trader?
Having a separate business bank account could be a good option to track business income and expenses when you’re a sole trader. It can help make your accounting and tax returns less complex.
Having a dedicated business account also adds a professional touch to your business and can instil trust in your clients, suppliers, and partners.
Does a sole trader need a business plan?
It’s a good idea to have a business plan if you want to start your own business as a sole trader. A business plan can help you set out your goals and how you’ll achieve them. In addition to a business plan, our starting a business checklist covers a list of things you’ll need to consider to set your business up for success.
How do you calculate your salary?
Managing the day-to-day cash flow as a sole trader is different to receiving a regular annual income from an employer.
Start with a financial plan, which can help you calculate your cash flow, profit and loss.
Think about how you’ll pay yourself, as well as if you’ll have enough savings to cover any cash flow gaps, or need to take out a business overdraft or loan.
No matter where your business journey takes you, it's crucial to keep track of your business transactions to maintain cash flow, stay on top of your tax and super obligations, and keep your accounting up to date.
Visit our small business hub for more guides, tips and advice for every stage of your business journey.
