At what income should I switch from sole trader to company?

There is no single magic number, but once your business profit consistently pushes you into the higher individual tax brackets, the flat company tax rate usually starts saving real money. Liability and contracts matter too, so get personal advice before switching.

The first big decision

Sole Trader vs Company: which structure fits your business?

Q: Can I change from sole trader to company later?

Yes, many businesses start as sole traders and incorporate later. The change involves registering the company, moving assets, new bank accounts and updating contracts, and it can have tax consequences if done wrong, so plan the transition with a registered tax agent.

Q: Does a company pay less tax than a sole trader?

A company pays a flat company tax rate on profits, while sole traders pay individual marginal rates up to 45 percent. At higher profits the company rate is usually lower, but money you take out of the company is still taxed in your hands, so the real saving depends on how much profit you retain and reinvest.

Q: What does it cost to run a company vs a sole trader?

A sole trader has almost no setup or ongoing registration costs. A company pays an ASIC registration fee once, an ASIC annual review fee each year, and typically higher accounting fees because it lodges its own tax return and keeps statutory records.

Tax rates, personal liability, costs and obligations compared side by side, plus the signals that tell you it's time to switch. Written by registered tax agents who set up both every week.

The short answer

Start as a sole trader if you're testing an idea with low risk and modest income: it's simple and nearly free. Move to a company when your profit grows, you sign bigger contracts, hire staff or need to protect personal assets: you get limited liability and a flat company tax rate in exchange for more obligations. The switch has tax consequences, so time it with advice.

Side by side

The differences that actually matter

Factor	Sole Trader	Company (Pty Ltd)
Legal identity	You are the business. No separation.	Separate legal entity that owns assets and signs contracts.
Personal liability	Unlimited: business debts are your debts.	Limited: your personal assets are generally protected.
Tax on profits	Individual marginal rates, up to 45%.	Flat company tax rate on retained profits.
Setup cost	Nearly free: ABN is free, business name is a small ASIC fee.	ASIC registration fee plus professional setup.
Ongoing obligations	Your individual tax return covers the business.	Own tax return, ASIC annual review, statutory records.
Paying yourself	Take money freely: it's all your income.	Salary, dividends or both: planned, documented, tax-effective.
Credibility & contracts	Fine for small clients and trades.	Preferred by larger clients, lenders and partners.
Best for	Testing an idea, side income, low-risk services.	Growth, hiring, higher profits, asset protection.

Rates and fees are set by the ATO and ASIC and can change; we confirm the current numbers in your consultation.

Person choosing between two paths symbolising the sole trader versus company business structure decision

Two roads, one decision

The structure you choose shapes the next five years

Take the comparison above with you: when profit, risk or contracts grow, the wider corridor usually wins.

Quick self-check

Which column sounds more like you?

Stay (or start as) Sole Trader if...

You're validating an idea or earning side income
Your work carries low risk of claims or debts
Profit sits comfortably in the lower tax brackets
You want minimum admin and cost while you grow

Move to a Company if...

Profit keeps climbing into the higher brackets
You're hiring staff or signing bigger contracts
A claim against the business could hurt your family assets
You want to reinvest profits or bring in partners

Timing the switch

Five signs it's time to incorporate

If two or more of these apply, the numbers usually favour a company. Worth a conversation.

Your yearly profit pushes you into the top individual tax brackets

You're about to hire your first employee

Clients or tenders ask for a Pty Ltd before signing

You've bought a home or built assets worth protecting

You want to retain profits in the business to fund growth

Bonus: you're planning to bring in a co-founder or investor

Ready to make the switch, or still weighing it up?

We register companies with the right structure from day one, and we manage the transition from sole trader without disrupting your business or triggering avoidable tax. The advice is honest and the process is proven.

Sole Trader vs Company FAQ

What founders ask before deciding

Is it better to be a sole trader or a company in Australia?

Neither is better in all cases. Sole trader suits low-risk businesses starting out: simple and cheap. A company suits growing businesses: limited liability and a flat tax rate, in exchange for more obligations. Start from your income, risk and plans, not from what others did.

At what income should I switch to a company?

There's no single magic number, but once your profit consistently pushes into the higher individual brackets, the flat company rate usually starts saving real money. Liability and contracts matter too. We run your numbers in the consultation.

Can I change from sole trader to company later?

Yes, it's a common path. The change involves registering the company, moving assets, new accounts and updated contracts, and can have tax consequences if done wrong, so plan the transition with a registered tax agent.

Does a company pay less tax than a sole trader?

Companies pay a flat rate on profits; sole traders pay marginal rates up to 45%. At higher profits the company usually wins, but money you take out is still taxed in your hands. The real saving depends on how much profit you retain, which is exactly what tax planning optimises.

What does it cost to run a company vs a sole trader?

Sole trader: almost nothing (free ABN, small business name fee). Company: ASIC registration once, ASIC annual review each year, and higher accounting fees because it lodges its own return. If you stay sole trader, your individual tax return covers the business.

Get the structure decision right the first time

Consultation with a registered tax agent. We run your numbers and give you a straight answer, in English o en español.

Book a consultation Company Registration