Sole trader vs company in Australia: which should you choose?

Last reviewed 2026-07-17

Your business structure affects cost, paperwork, tax and how much personal risk you take. Most people start as a sole trader; some move to a company later.

Sole trader

• Cheapest and simplest to start
• You and the business are the same legal person
• Business debts can put personal assets at risk
• Income is taxed at your individual rates
• Good for freelancers, solo operators and testing an idea

Company (Pty Ltd)

• Separate legal entity registered with ASIC
• Limited liability (with important exceptions for directors)
• Higher setup and ongoing costs
• More reporting and director duties
• Often used when risk, partners, investment or growth increase

ASIC — Register a company

Quick comparison

• Budget under a few hundred dollars to start → sole trader is usually fine
• Clients, staff or contracts create real liability risk → consider a company + advice
• You want maximum simplicity → sole trader
• You plan to bring on co-founders or investors → company is usually cleaner

Partnership (brief)

Two or more people in business together without a company. Still relatively simple, but partners can be liable for each other’s business debts. Get a written agreement.

business.gov.au — Business structures

You can change later

Many businesses start as sole traders and incorporate later. Changing structure has tax and admin implications — talk to an accountant before you move significant assets or contracts.