Pros And Cons For Web Designers When Doing Business As A Sole Trader

When web designers take their knowledge and skills and use them to start a business such as a web design agency, there are numerous legal obligations to be met and decisions to be made. One of the first and most important is what legal business structure their web design agency is to have. There are three main options, which are sole trader, partnership, and company.

Unless they are starting the business with another person, a partnership will not apply, and for many web designers setting up a company is often not necessary at this stage. That leaves us with sole trader, or sole proprietor, as some call it. Being a sole trader is a hugely popular way for web designers to establish a business, but, as with anything business-related, it does have rules, pros, and cons, so let us look at them in some detail.

What Being A Sole Trader Means

First, being a sole trader is a perfectly legitimate way to operate a business, and is the choice of millions of business owners. In effect, it is you, the individual, which takes on the responsibilities and obligations of your business. As the business is yours, you have complete control and are not answerable to directors or shareholders when making decisions concerning the business.

How To Register As a Sole Trader

Provided you follow the relevant steps, registering as a sole trader should not be difficult. Here are the main steps:

1) First, register for an Australian Business Number (ABN) via the Australian Business Registrar

2) You must next register the name of your business unless you are trading under your own name. In most cases, a business name is recommended as it helps to brand your web design agency. You can register a business name yourself, or use a business registration service by paying a small fee.

3) For taxation purposes, you can register for Goods and Services Tax (GST). Note, that you can also use your personal Tax File Number (TFN) for taxes.

Pros Of Being A Sole Trader

  • You are your own boss, and as the sole owner of the business all the income accrues to you alone
  • Sole traders have lower and fewer set-up costs meaning that the ‘lack- of budget barrier to starting your business is removed
  • Setting up a sole trader business is easy, and can be done in next to no time
  • Your business’s admin etc. is private and you do not have to publicly declare your earnings
  • In Australia, tax benefits are available to sole traders with part of your profit being tax-free as per your personal income allowances
  • If you decide to close your business, the process is easy
  • You retain the right to alter your sole trader status to a partnership or company if your business grows

Cons Of Being A Sole Trader

  • You have unlimited liability to meet and pay all debts and financial obligations of the business, This could mean your personal assets are at risk
  • Higher tax rates will apply to a sole trader if their business earns over a certain amount as per current tax allowances
  • You are responsible for setting up your superannuation, although tax deductions can apply
  • No annual leave or sick leave entitlements, which means if you take a holiday or are unable to work due to illness, your business has no income