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Sole Traders, Sole Traders - Coggle Diagram
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Sole Traders
Establishment
No formal establishment process and should the sole trader trade under their name no registration needed.
If trading under a any other name Business Names Registration Act 2011 (Cth) requires registration of the business name
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To register, will need an ABN
Liability
Sole trader personally liable for dents incurred and liability unlimited. Liability may be limited through insurance policies
The business, even though under a trading name, is not separately liable for any debts. Granting a business name does not create a business structure
Governance
No specific laws govern the sole trader. Must comply with laws applicable to the registration of that trade eg, solicitors, accountants
Control
Sole trader has absolute control. May employ others, they are only accountable to sole trader.
Fundraising
Funds are limited to what the sole trader has in savings or loans, or business profit to finance growth
Continuity of existence
Perpetual succession not applicable. The business normally ends on death or bankruptcy of the individual
Privacy
Apart from Commissioner of Taxation, profits do not need to be disclosed, financial affairs kept private
Taxation
Sole trader is liable, according to tax rate applicable to individual taxpayers, for payment of tax on income earned
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Owned and controlled by the sole trader who also enjoys profits and is directly liable for tax on income earned.
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Advantage of simplicity, flexibility and control, use business losses to offset other taxable income
Significant disadvantages , being personally liable for business debt, limited financing options, taxation at individual tax rate rather than company tax rate