How to Transition From Sole Trader to Company (Without Screaming!)

Alright business superstar. Yes, you over there, the one with the business that’s ready to put on its big boss panties and become a… wait for it… company! Yes sista, it’s not just you anymore. You’re levelling up and doing the bad b*tch work that’ll send your business to new heights. Goodbye sole trader, hello company. This is the business structure equivalent to a big flashing neon sign that says ‘level up’. You’ve made it, now let’s do this – scream free.

So, um, how do I know it’s time to go from sole trader to company?

Great question. The fact you’re reading this article is probably a darned good sign your business is makin’ moves that you think could mean it’s time to make it official, but let’s dig into the usual reasons business owners decide to transition from sole trader structure to company structure.

  • You’re getting taken for a ride by your taxes and want to access company tax rates rather than paying individual tax rates on everything your business makes
  • You want to separate your personal risk from the business’ risk
  • You’re shooting your shot at getting investment, bringing in senior staff or preparing to tackle expansion or growth plans (you go, girl)

What will be different when my business becomes a company?

When you transition from sole trader to company, there are a few things that’ll be different. It’s kinda like a business glow up. Still the same, but with a bit of an upgrade.

Company vs sole trader taxes

As a sole trader, you as the individual pay tax on the business’ income at your marginal tax rate, which as you probably know, gets pretty high once you start earning serious cash. As a company, your business will pay the flat company tax rate of 26 per cent (set to reduce to 25 per cent soon) – and that’s pretty sweet compared to the 45 per cent you could be paying at the top end as a sole trader. Yikes.

Tax returns

As a sole trader, your tax returns form part of your individual tax return, but as a company, you need to do a separate one for the business. Think of it like this: as a sole trader, you are your business. When that business becomes a company, it’s like a second person. This means there is more paperwork and reporting required, but don’t stress. There are some super awesome accountants out there that can be your own money hype gang when it comes to company tax returns. Ahem.

Separate business bank accounts

As a sole trader, how you manage your business finances is up to you, but as a company, you must have a proper business bank account. Plus, your financial records need to be extra tight. Again, we know a few badass babes that can help you manage your business finances on the regular. Just sayin’.

Company Director duties

Ooh, Director – suits you. As a company, you’ll become the company Director, which means you need to meet certain requirements and obligations. It’s nothing too scary, but it’s important to remember that with great power comes great responsibility.

Other differences

There are a few other changes you’ll experience when you go from sole trader to company, like the way you employ people, insurances, ongoing costs, and the potential for annual reporting.

How to change from sole trader to company

The juicy bit: changing your business structure. The key things you need to do when becoming a company are:

  • Ditch your existing ABN (yep, cancel that bad boy) and reapply for a new one as a company
  • Register your company with ASIC
  • Transfer any assets from your sole trader business to your company

… oh, and find a kick ass accountant or finance manager (ahem) to help you with the ongoing compliance, record keeping and lodgement requirements of a company.

Need help? Don’t worry, we know a gal… or two

Kidding, it’s us. At Bloom Money, we’re your money hype gang that can help you navigate that all-important sole trader to company transition, as well as the compliance, record keeping and ongoing responsibilities that come with the changeover.

Give us a bell or slide into our inboxes to find out more about how we can help you make bold moves in your biz, level up your money game and just generally crush it as a badass business owner.

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Thanks girls! I’ll be coming back”

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Lani Buckley
“Today was spent with the lovely ladies at Bloom Money for their first Coffee Calculators workshop It was absolutely class & Id highly recommend them for any women in business whether you’ve been doing it for 2 months or 20 years!”

★★★★★

Claudia Lamb
“My session with Liv and Jaimie was everything I hoped for and more, I wasn’t expecting to make it through my very long list of questions I have accumulated over the last few months at Louder Now there was even time to spare to work on things I hadn’t even considered. Not only do I now know exactly what I need to do to reach my financial goals, but I am also confident I can do my own tax this year! If you are a business owner who wants to know your numbers, I cannot recommend Bloom Money enough!”

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