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How to set up as a sole trader - legal requirements

10 March 2023

If you are considering starting your own business, one of the first decisions you will need to make is whether to set up as a sole trader or as a company. A sole trader is an individual who owns and operates a business. Setting up as a sole trader can be a relatively straightforward process, but it's important to understand the legal requirements involved.


Business Name Registration

If you are trading under a name that is not your own, you will need to register your business name with the Australian Securities and Investments Commission (ASIC). This is a legal requirement under the Business Names Registration Act 2011. You can register your business name online through the ASIC Connect website.


Australian Business Number (ABN) Registration

As a sole trader, you will need to register for an ABN with the Australian Business Register (ABR). An ABN is a unique 11-digit identifier that is used to identify your business to the government and other businesses. You can apply for an ABN online through the ABR website.


Goods and Services Tax (GST) Registration

If your business has an annual turnover of $75,000 or more, you will need to register for GST with the Australian Taxation Office (ATO). GST is a tax on the goods and services you sell, and it is currently set at a rate of 10%. You will need to include GST in the price of the goods and services you sell, and you will need to file regular Business Activity Statements with the ATO.


Other Legal Requirements

There may be other legal requirements you need to meet depending on the nature of your business. For example, if you plan to sell alcohol, you will need to obtain a liquor licence from your state or territory government. If you operate a home-based business, you may need to obtain approval from your local council. If you plan to employ staff, you will need to comply with employment laws and regulations.

You may also need to consider registering for Pay As You Go (PAYG) withholding, workers' compensation insurance, and complying with employment laws and regulations.


Personal liability

It's important to note that as a sole trader, you are personally responsible for the debts and liabilities of your business. This means that your personal assets may be at risk if your business incurs debts or is sued for damages. It's a good idea to speak to a legal professional and accountant to ensure that you understand your legal obligations and to protect your personal assets.

Here are the key takeaways of setting up as a sole trader in Australia:


1.      Register your business name with ASIC.

2.      Apply for an ABN and GST registration with the ABR and ATO respectively.

3.      Obtain any necessary licenses or permits, depending on your business's nature.

4.      Consider other legal requirements such as PAYG withholding and workers' compensation insurance.

5.      Seek professional legal advice to ensure that you meet all the necessary legal requirements and operate your business lawfully.


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