Attention Sole Traders: Make Sure Your Home Is Safe!

Doing business as a sole trader certainly has its advantages.  From the relative ease in setting it up, to the avoidance of possible double income taxation, there is no question that if you wish to start small on your own, perhaps the structure of a single proprietorship or of a sole trader may be the right one for you.

If you dream big, however, and foresee the growth of your business, then you may have to consider the advantages of establishing a limited proprietary company instead of being a sole trader.  Here’s why.

A limited proprietary company is an incorporated entity.  Its existence starts upon the issuance of the ACN by the Australian Securities and Investment Commission (or ASIC).  As a juridical entity, existing corporation laws consider the limited proprietary company as a business set-up that is distinct and separate from that of the sole shareholder or member.

As such, the liabilities of your company do not become your personal liabilities.  Your company’s creditors will not necessarily be your own creditors.  This is particularly important when your business may one day hit a financial down cycle.

And if you are a sole trader and this happens here is where it can get very bad. Go here to find out more about Sole Traders Versus Pty Ltd Formations.

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