Sole trader vs company – 4 reasons why a company structure is better

Sole trader vs company – “which is better?” you might ask. Adrian our Principal Accountant discusses 4 reasons why company structures are better than sole traders. If you’re operating a sole trader business, consider the advantages of a company/trust structure covered in this video.

Here are the 4 reasons why a company structure is better than a sole trader

1) Asset protection with sole trader vs company

A company is a separate legal entity that runs the business. So if someone wants to sue your business, they have to sue your company, not you personally. However, if you’re a sole trader, you would get sued and any business or personal assets that you own are at full risk.

Now, if you don’t think this would ever happen to you, think again. Thousands of people get sued every year in Australia, and there are a million things that can go wrong when running your business, and insurance won’t always cover you.

If you’ve built up wealth over a long period of time, or even a short period, a company structure will help protect your personal assets from creditors and customers.

2) Tax Savings

Under a company structure, there are a lot more tax-saving opportunities. Quite simply, company structures (which could be either a company or a trust) are among the best tax-saving vehicles available to your business. If you’re earning over 45,000 profit per annum, and you’re operating as a sole trader, you’re probably paying more tax than you would be under a company structure.

You might think you’re saving money as a sole trader with lower compliance costs, but you might be paying a lot more tax than if you had a company structure, which removes any benefit of a sole trader business.

3) Work Cover Insurance

A sole trader can’t actually get Workcover insurance personally.

As a sole trader, you can only get income protection insurance as an alternative, which can actually end up costing you a lot more money than a Workcover policy under a company structure.

4) Compulsory Superannuation

If you work mainly for one contractor for the year, that contractor has to pay 10% super directly into your Superfund, with the rest paid into your bank account.

However, a company structure provides more flexibility in how much super to pay yourself, which could be thousands of dollars a year.

So if you’re running a business as a sole trader, I strongly advise moving over to a company structure as soon as possible, so you can tax plan more efficiently and ensure that you and your assets are not a risk.

If you need any assistance in making this transition, Float Accounting can provide you with a free consultation tailored to your personal circumstances. We’ll explain all the benefits you would receive while changing to a company structure, the costs, and make the transition seamless for you.

Please reach out to me if you need assistance.


The information contained in this publication is for general information purposes only, and does not take into consideration your individual circumstances. You should obtain personalised professional advice before acting upon any information contained herein. To the maximum extent permitted by law, we accept no responsibility for any loss incurred by any person directly or indirectly due to any action taken or refrained from as a consequence of the contents of this publication.

About The Author

Adrian Monarca
Adrian is Co-Founder, CFO, and the Principal Accountant at Float Accounting.