Frequently Asked Questions
You need to check the relevant legislation in your State and Territory, as the rules are different in each jurisdiction.
-
Does registration of a trading name create a separate legal entity?
- No. Even though you have registered a business name as a sole trader this business name does not create a 'separate legal entity' apart from yourself as an individual. For legal purposes you are considered to be running the business as an individual.
- You will have personal liability for any debts accumulated or wrongs committed in the course of running your business as a sole trader even where you have registered a business or trading name.
>> Read more & related FAQ's
-
How do I choose a business name?
- There are a few rules to be followed when choosing a business name:
- it cannot be a name that is already registered in your relevant state;
- it cannot be a name that is already taken as a registered company name;
- you must ensure that you do not name your business a name which has been protected by a registered trade mark already in existence; and
- your name should allow customers or clients to identify with your business and to differentiate it from other competitors.
- You may consider registering your business name as a trade mark to protect it against use or misuse by other persons.
>> Read more & related FAQ's
-
What taxes do I need to register for as a sole trader?
- This will depend on many elements that are specific to your particular business. Some taxes apply to all businesses. Others are specific to you based on the size of your business and type of industry in which you operate.
- All sole traders will be liable to pay income tax on the profits of their business at their individual tax rate.
- You only need to register for Goods and Services Tax (GST) if your current or expected turnover is $75,000 or more. However you may choose to do so if your turnover is less in order to claim back GST paid on purchases for your business.
- If you employ people and they receive 'fringe benefits' due to their role as employees then you need to register for Fringe Benefits Tax (FBT). Fringe benefits include such things as:
- use of a company car;
- free products or discounted products; and
- any private expenses an employer pays on an employee's behalf.
- Pay As You Go (PAYG) withholding tax is only required if you intend to employ people as part of your sole trading business.
- Payroll tax is specific to your individual state. The rate of tax and exemption thresholds will vary from state to state.
>> Read more & related FAQ's
-
Do I really need a lawyer?
- Starting a business is a big decision that can greatly affect your prospects of personal and family wealth accumulation as well as your lifestyle. Understanding how to operate a business within a varied and complex legal environment is crucial to your success.
- Engaging a lawyer early in the process can ensure that you understand the different ways in which your choice of business structure will affect your long term prospects of profit and growth. It can also help you avoid any mistakes that will open you and your business up to personal liability or unnecessary costs from not understanding how to go about establishing a business.
- The earlier in the process that you engage a lawyer the easier you will find the entire decision making process around starting a business.
- Our Phone a Lawyer service may be able to put you in touch with an experienced business lawyer for a preliminary consultation.
>> Read more & related FAQ's
-
Why do I need insurance for my business?
- There are many compulsory insurances for small business owners and various optional insurances depending on the amount of risk you are comfortable with. The risks associated with being under-insured are substantial.
- Purchasing appropriate insurance for your business is a way of minimising risk to yourself and others.
- As a sole trader when things go wrong in your business you will be held personally liable. This is because you are not seen as separate from your business unlike businesses run as companies or trusts.
- Insurance is a way of protecting yourself personally from claims made against you that arise from your business operations.
- Some insurance is compulsory such as:
- workers compensation insurance in the event you employ workers; or
- third party insurance for motor vehicles.
- Other insurance is optional but strongly advisable for example:
- income insurance; and
- public liability insurance.
- If you have appropriate insurance any claims made against your business will be handled by your insurance company rather than you having to commit funds from your personal estate.
>> Read more & related FAQ's
-
Can I just use my own name as a business name or do I need to register a trade mark?
- This depends on your particular business needs. It is important to understand the difference between the protections offered by registration of your business name and those associated with a trade mark.
- A business name is a unique identifier for you and your business but it does not provide you with any protection against others using that name.
- A trade mark will legally protect your business name and prevent other people and organisations from trading with it or imitating it. This protection is limited to Australia.
- Registration of a trade mark will last for 10 years initially and then will have to be renewed. You should also ensure that you regularly use your trade mark as other individuals can apply to de-register your trade mark if you do not use if for three years.
- You can find more information about trade marks in our Intelectual Property area.
- You may also wish to use our LegalPlan™ membership to ask lawyers for tenders or a Fixed Fee Quote in relation to your intellectual property protection needs.
>> Read more & related FAQ's
-
Can I operate my business from home?
- Yes. Many small businesses are wholly or partly operated out of the owner's home.
- You may be eligible for tax relief on some of your business expenses for example the proportion of your electricity and phone bill you use to operate your business.
>> Read more & related FAQ's
-
What is a Business Activity Statement (BAS) and do I need to complete one each quarter?
- You are only obliged to submit a BAS if your income is $75,000 or more for the financial year. This is the same threshold for triggering compulsory GST registration.
- The BAS is a series of forms used by business owners to report on their taxation obligations. They record a number of tax obligations throughout the year such as your:
- Goods and Services Tax (GST) payments;
- Pay As You Go (PAYG) instalments;
- PAYG withholding amounts; and
- any Fringe Benefits Tax (FBT) amounts.
- Businesses are required to self-assess their tax and it is often easier to do so quarterly rather than once a year at tax time.
- Depending on the complexity of your tax affairs you may wish to engage a lawyer, accountant or tax agent to assist you with your BAS preparations.
>> Read more & related FAQ's
-
What licenses do I need when starting my business?
- This depends on the type of industry in which you operate and the kind of business you run.
- A lawyer can help you understand your licensing and registration obligations and can keep you up to date when these obligations change in the future.
- Failing to obtain the correct licenses and registrations can result in your business being fined substantial amounts or even closed down. It also opens you up to increased liability in the event that something goes wrong.
- To give you an idea of the kinds of licensing requirements that exist you can search the Australian Business Licence and Information Service (ABLIS) at https://ablis.business.gov.au/pages/home.aspx.
- This website lists the licenses and registrations applying to many different industries in all Australian states and territories.
>> Read more & related FAQ's
-
Do I need to start a business if I'm just earning some money from the things I like doing in my spare time like hobbies?
- Generally if you are just engaging in a hobby you will not need to register as a business.
- However there is no set test to say whether your activities amount to more than a hobby. A few guiding questions can help you decide if it is time to register as a business:
- are you carrying on the task or activity with a view to profit or for commercial reasons?
- do you plan your activities and carry them out in a business-like manner?
- are the activities repeated on a regular basis?
- is there a prospect of making a profit?
- will the profit-making be ongoing?
- If you have answered yes to any of these questions you should consider whether you are actually carrying on a business rather than just spending time working on a hobby.
- If you are deemed to be carrying on a business then there will be tax and reporting obligations imposed by the ATO.
- If you have any concerns you can use our free and anonymous Ask a Lawyer service to get information specific to your situation.
>> Read more & related FAQ's
View more Information on Sole Trading