When you’re starting out a new sole trader business it can be tempting to do it all yourself, which leads people to ask “How do I register a new sole trader business. Honestly, it can be confusing. Especially if you’re trying to sort it all out for yourself. While my first advice would be to make sure you talk to a professional, there are some things you can do on your own.
The basics of how to register a new sole trader business: Register an ABN
To register a new sole trader business in Australia you need an ABN.
There are three options for registering an ABN, and all of them come with options for additional registration and levels of support.
Option 1: Register yourself, for free
If you have a tiny business, or no funds to get started, then this is way to go.
Go to https://www.abr.gov.au/business-super-funds-charities/applying-abn
This website is the offical Australian Business Register website. You can enter your details and apply for an ABN for FREE.
Full control of the process
Mistakes can usually be rectified without penalty
No professional guidance
Easy to make mistakes
Risk jumping in to setup a business without proper assessment and understanding of your options
Option 2: Pay a professional to sort it all out for you
If you’re worried about making a mistake, keen to ensure you are properly set up from the start, or just don’t have a head for the paperwork, then you can hire a professional.
A professional tax accountant will usually package in the application for an ABN as part of a full service involved in setting up your business, discussing your options, and helping you make the right choice for your situation.
Professional advice right from the start
Getting your ABN is just part of the overall package of setting up your business
You can relax and let the professionals handle the paperwork
The cost to pay a professional can be significant
If you’re a micro business you may not get the full value out of a full value professional service
Reliant on information going through your accountant, meaning things could potentially be held up
Option 3: Pay an online company to lodge the forms for you
This option is listed more as a warning than a recommendation. It’s here because there are a lot of (legitimate) businesses who set themselves up to appear at the top of your google search when you type in “how to register a business”, or “how to register for an ABN”. These listings appear up there using names that sound like they are the proper channel to go through. They exist for lots of free services, like applying for a TFN, registering an ABN, registering for GST, registering for PAYGW, and looking up business names. The problem is, they typically charge you close to $100, but don’t provide any additional value beyond what you’d get if you chose the free, do it yourself option.
You get an ABN
Cheaper than paying a tax accountant for a full professional service
You’re paying a fee for filling out a form that is practically the same as you’d be filling out for a free application anyway.
Typicallly no or very limited additional value services added for your fee
Impersonal service- you don’t get to have a discussion to understand your options and be confident in your choices
Other Registrations for your new sole trader business
When you register a new sole trader business you can settle for just an ABN, at least for now. However you will need to consider whether you should register for GST. If you are intending to hire people (you don’t count as an employee when you’re a sole trader), then you also need to register for PAYGW (as well as understanding the requirements of workers compensation insurance, HR obligations, and superannuation). You can apply for GST and PAYGW as part of your initial registration process, or you can apply later when your business reaches this point.
Register A Trading Name
When you are a sole trader, YOU are your business.
This means that you, John Smith (or whatever your name is), are the legal entity of the business. You do not have to have a trading name. If you don’t have a trading name then you simply sell your goods or services in your own name. However, most people want to use a trading name.
In Australia, if you wish to use a trading name, then you need to register for one.
Registering a trading name does come with a cost. Just ensure you are registering directly through ASIC to pay the cheapest price. As of October 2020 a business name is $37 for one year or $87 for three years.
Go to the ASIC website to register directly for a trading name.
Be aware that typing in “how to register for a trading name” or similar queries, will typically result in businesses with official sounding names appearing as ads at the top of google. You will pay more for your trading name if you utilise these services. Similar businesses often also send out letters to businesses in the months before a trading name is due to expire, asking you to renew your name through them. While their letters do clearly state that they are not the official ASIC renewal document, a lot of people miss this.
ASIC will also send out a notification near renewal time so that you can renew your trading name if you intend to keep using it.
If In Doubt about how to register a new sole trader business…
If in doubt, talk to a professional. While it will cost you a lot more to go this route, it’s often worth it for the peace of mind and the added value that can be gained through working with an experienced, and qualified professional.
To learn more about what you need to know about setting up a new sole trader business, see the other blogs or facebook posts in R&R Tax Services.