Sole trader or company is one of the first big calls you make in business — and plenty of tradies pick one almost by accident and never revisit it. Here is what actually separates the two on tax, liability, cost and admin, so you can make the call on purpose.
Sole trader — simple and cheap
As a sole trader, you are the business. One ABN, one tax return, minimal setup. It is why almost everyone starts here.
- Pros — cheap and quick to set up, simple admin, you keep full control, and losses can offset other income.
- Cons — you are personally liable for business debts (your house and savings are exposed), and all profit is taxed at your personal marginal rate, which climbs steeply as you earn more.
Company (Pty Ltd) — protection and flexibility
A company is a separate legal entity. It costs more and comes with more paperwork, but it changes your risk and tax position.
- Pros — limited liability (your personal assets are generally protected), a flat company tax rate that is often lower than top personal rates, and more flexibility in how profits are paid out.
- Cons — more expensive to set up and maintain, more reporting and compliance (ASIC, separate company tax return), and directors still carry some legal duties and responsibilities.
How to decide
A few honest questions usually point the way:
- How much are you earning? The more profit, the more a company's flat tax rate can help.
- How much risk do you carry? Bigger jobs, staff, or higher-liability work make asset protection matter more.
- Are you growing? Hiring, bringing in a partner or scaling up all lean towards a company.
- Can you handle the admin? A company means more paperwork — which is exactly the sort of thing worth systemising early.
Don't confuse structure with GST
One common mix-up: GST registration has nothing to do with whether you are a sole trader or company. It is about turnover — hit $75,000 a year and you must register and charge the 10% either way.
Free GST Calculator
Whichever structure you pick, if you are registered for GST you need the 10% right on every quote and invoice. This works it out in a tap.
Open the free toolFrequently asked questions
Most tradies start as a sole trader because it is cheap, simple and quick to set up. A company (Pty Ltd) becomes worth considering as you earn more, take on staff, want to separate personal and business liability, or need the tax flexibility. There is no single right answer — it depends on income, risk and growth plans, so it is worth a chat with an accountant.
A sole trader is you and the business as one legal entity — simple, but you are personally liable for debts and taxed at personal rates. A company is a separate legal entity that limits your personal liability and is taxed at the company tax rate, but it costs more to set up and run and has more admin and reporting obligations.
It can be, once your income is high enough. Companies are taxed at a flat rate that is often lower than the top personal rates, and they allow more flexibility in how profits are paid out. But below a certain income the extra cost and admin can outweigh the tax benefit. This is exactly the sort of thing to model with an accountant.
GST registration is about turnover, not structure. Whether you are a sole trader or a company, once your business turns over $75,000 or more a year you must register for GST and start charging the 10%. Below that it is optional.
Whatever structure you run, the admin is the same grind
Sole trader or company, you still have to quote, invoice, chase payments and keep records. Admin Substitute handles all of it automatically — so you can focus on the work, not the paperwork. From $8/day.
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