What is the difference between a Pty Ltd company and a sole trader?

Choosing the right business structure affects your tax, your safety, and your growth potential.

1. Sole Trader

You are the business.

• Pros: Cheap to set up (just an ABN), low admin, full control.
• Cons: Unlimited Liability. If someone sues the business or it goes bust, they can take your personal house, car, and savings to pay the debt.
• Tax: You pay individual marginal tax rates (which can be high if you earn a lot).

2. Pty Ltd Company

A company is a separate legal “person.”¹

• Pros: Limited Liability. Shareholders are generally only liable for the money they put into the company. Your personal assets are safe (the “Corporate Veil”).
• Tax: Companies pay a flat tax rate (currently 25% for small businesses), which can be lower than the top personal rate.
• Cons: Higher setup costs (~$1000+), annual ASIC fees, and strict duties for Directors.

3. Discretionary Trust (Family Trust)

A popular third option.

• Pros: Excellent for asset protection and tax flexibility (distributing profits to family members with lower tax rates).
• Cons: Complex to set up and administer.

Related Topics

• Directors Duties
• Partnership agreements
• Commercial Law Practice Area

Strategic Advice

Don’t just guess. Your accountant and lawyer should work together to find the structure that fits your risk profile and revenue.

Need structuring advice? Contact Bell & Senior today. Call (07) 5532 8777.