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How to open a business as a sole trader

Today I would like to answer the most common question  – how do I open a business easily, with minimal costs? The answer is – to become a sole trader! Just remember – by choosing this structure, you are personally bearing all risks associated to your business (see my post Business Structure 2 – Risk)

You will need just a few hours to understand what you need to do and to become a business owner.

To register you will need to go through the following steps. Please remember, if you find a non-government website who is offering a registration – they will ask you for an additional service fee.

ABN (Australian Business Number).

You can apply for an ABN through the government site: https://www.abr.gov.au/business-super-funds-charities/applying-abn. This procedure is free of charge if you do it yourself on this website. If you will provide all your details, including your TFN (Tax File Number), you will receive your ABN immediately upon finishing the application.

GST (Goods and Services Tax) registration.

You have to apply for GST if your annual income (before any deductions) from the business exceeds $75,000 . If your income is below $75000 this registration is voluntary. But I highly recommend to register for GST if your sales are GST-free (eg. basic food, some education, some medical and healthcare products, some childcare services, exports and services to non-Australian residents). This way you will receive a refund on the GST paid on your purchases, without paying GST on income. You can register for GST at the same time as your ABN application.

PAYG Withholding registration

You will need to register for PAYG if you will have employees. You can do it at the same time as ABN registration (you will be asked a question if you wish to do so at the end of ABN registration) or later, when you actually will hire employees.

Business Name registration.

You will need to register your business name only if your business name is different to your own name, and want to secure it so that no one else can use it. You can register your business name on the following government website: https://asic.gov.au/for-business/registering-a-business-name/. Registration can be for 1 year ($37) or 3 years ($87)

ATO business portal.

You will need it to lodge some reports and statements, and to communicate with the ATO. Full information you can find on the ATO website: https://www.ato.gov.au/business/business-portal/

You will need to download a MyGovID (it is different to MyGov) application on your phone and connect to RAM (Relationship Authorisation Manager) to have access to your ATO business portal. You can find out more about MyGovID here:  https://www.mygovid.gov.au/

Congratulation, you are a business owner!!

So, now you may decide on other attributes of a business:

  • separate bank account for business purposes only (+ saving to accumulate fund to tax payment)
  • your website,
  • logo,
  • business cards,
  • software to record your income and expenses (e.g. Xero) or just use Excel,
  • marketing strategy etc

Your reporting to the ATO now will be different compared to as an individual, and we will discuss this in a separate post ATO reporting for Sole Traders.

Also, here you can find information on How to close a Sole Trader business.

If you would like us to help you out with the structure of your business don’t hesitate to contact us!