Business Structure Of A Business Essay
2.1. Sole trader
A sole trader business structure is a person set up an entity which individual legally responsible for all aspects of the business ("Sole Trader"). Any debts and losses cannot be shared with others; it is totally independent.
This business structure is the simplest, and relatively cheapest business structure that can be chosen when starting a business in Australia. First of all, it is easy to set up and operate. And the owner retains fully control of the assets and business decisions, thus the business owner has more freedom compared to the case where one has business partners. It also has fewer reporting requirements. Any losses incurred by the business activities may be offset against other income, such as owner’s investment income or wages (subject to certain conditions). Moreover, it allows to use individual Tax File Number to lodge tax returns. The owner does not have to pay payroll tax, superannuation or workers’ compensation for employees, which result in less expenses. Lastly, it is easier to change business structure if the business expands or just close the business compared to other structures.
However, it does have some shortages: Unlimited liability which means all the personal assets is involved if the business going down; Little opportunity for tax planning, which means it would be very difficult to split business profits or losses with family members…