For web designers in Australia who wish to take their skills and use them to create a business, several decisions must be made as part of that process. Perhaps the most important, and the one that will define the legal status of their web design business, is what business structure they will use.
The choice will most likely be one of three legal business structures: sole trader, partnership, or company. Each has different characteristics and essential variations in its legal status, which web designers should be aware of. To that end, we have outlined the details of all three below.
Sole Trader
Becoming a sole trader is the simplest business structure of the three options. Often referred to as sole proprietor, to become a sole trader, you must first obtain an Australian Business Number (ABN). Next, you need to register the name of your business, which can be your name or a business name that has not been previously used by another business.
Although having a separate bank account from your personal statement is not required, it is highly recommended as it allows you to track your business’s income and outgoings, especially when it comes time to finalize your accounts for tax purposes. Again, although not mandatory, you should also take out business insurance.
The reason for that previous suggestion is that as a sole trader, you are personally responsible for the unlimited liabilities of your business, including debts, meaning your personal assets could be at risk. Also, if someone takes legal action, it is you who the subject to any penalties, and again is where insurance can protect you.
