Sole proprietorship as a business owner or commonly known as a sole trader is the simplest form of business structure. It is also relatively easy and cheap to set up and maintain. But there are few other benefits.
Many new or intending business owners opt for sole proprietorship and choose to trade under their own name – for example, Karen Smith – while others opt to register a business name with the Australian Securities and Investments Commission (ASIC).
As a sole trader, you retain complete control of your business.
Sole proprietorship – understand the risks
There is no division between business assets or personal assets, which is where the issue lies. Your liability is unlimited and not a situation we would recommend to anyone.
Your share of any assets jointly owned with another person (such as your house or car) is also at risk.
Sole traders are taxed as individuals and pay income tax at personal tax rates.
Sole proprietorship means your business income is declared on your personal tax return along with any other assessable income (such as your salary or wages, interest, dividends).
Before entering into any form of business partnership it is imperative that you take professional advice. There are better options!