Do I Need a Company to Run My Business?

Thinking about starting a business and not sure if you need a company? This blog compares company vs sole trader structures, covering tax, marketing, legal risks, and ongoing accounting costs, so you can make the right choice for your goals.

Starting a business is exciting — but choosing your business structure can feel like a legal maze. Should you register as a sole trader, or do you need to set up a company? The right answer depends on how you want to run, grow, and protect your business.

1. Setup & Costs

Sole Trader:

• Quick and easy to set up (ABN is free) – Fast start for your business.

• Minimal legal paperwork – No complex registration.

• No separate tax return for the business – Everything reported in your personal return.

Company:

• Must register with ASIC (around $1000 setup) – Adds initial cost.

• Annual ASIC fees (~$290/year) – Ongoing compliance cost.

• Separate business tax return required – More involved bookkeeping.

• More legal and compliance steps from day one – Structure is more formal.

2. Tax & Accounting

Sole Trader:

• All income taxed in your name at individual tax rates – Simpler personal tax.

• Simpler tax return – No company reporting.

• Can use tools like eCashBooks to track income, expenses, GST (if registered) – Bookkeeping made easy.

Company:

• Pays flat company tax rate (currently 25% for small business) – May save tax at higher income.

• You may also pay tax on wages/dividends from the company – Double layer of tax.

• Requires a separate company tax return – Professional bookkeeping needed.

• You’ll likely need an accountant – Extra compliance cost.

3. Legal & Liability

Sole Trader:

• You are the business — full personal liability – Your assets are on the line.

• If the business is sued or goes into debt, your personal assets are at risk – No legal separation.

Company:

• Separate legal entity – Your business stands alone.

• Liability is limited (generally to the assets of the company) – Personal protection.

• Offers more protection but comes with more rules – Balance of risk and complexity.

4. Marketing & Media Presence

Sole Trader:

• Often seen as more personal and approachable – Build a relatable brand.

• Easy to build a brand around yourself – Great for consultants and creatives.

• You can still operate under a business name – Professional look without a company.

Company:

• May appear more professional or established to clients – Adds credibility.

• Some industries prefer dealing with companies (e.g. government contracts) – Opens more doors.

• Easier to scale the brand beyond yourself – Brand can grow bigger than you.

5. Business Growth & Structure

Sole Trader:

• Ideal for freelancers, solo operators, tradies, consultants – Simple and flexible.

• Less admin, more flexibility – Focus on doing, not reporting.

• Harder to bring on business partners – Limited growth pathways.

Company:

• Better suited if you plan to hire, raise funds, or scale – Growth-ready.

• Easier to onboard investors or co-directors – Share ownership structure.

• Structured for long-term growth, but more red tape – Scalability with more compliance.

FAQs

Q: Can I switch from sole trader to company later?
A: Yes, many people start as sole traders and register a company once the business grows or risk increases.

Q: Is a company better for tax savings?
A: Sometimes — especially if your income is higher. But companies also come with higher accounting costs and compliance.

Q: Will I look more professional as a company?
A: It depends on your audience. Some clients like the structure of a company, but many value personal service regardless of setup.

Q: Do I need an accountant for both?
A: Not necessarily. Sole traders can use simple tools like eCashBooks to manage their own books. Companies often need accountant support.

Q: Is it more expensive to run a company?
A: Yes. Setup costs, annual ASIC fees, company tax returns, and legal compliance all add up.

Closing

You don’t always need a company to run a successful business. It depends on how much risk you want to carry, how you plan to grow, and what your tax situation looks like. If you’re just starting out, a sole trader structure might be all you need.

What's Next?

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