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Sole trader vs company is one of the first big calls you make when a side project turns into a real business. The choice decides who owns the income, who is on the hook for debts, how tax is lodged, and even which addresses end up on a public register.
This guide compares the two structures using information from business.gov.au and ASIC, checked in October 2026. It is written for owners running a business from home who want a plain answer before they speak to their accountant.
Sole Trader vs Company: The Short Answer
A sole trader is an individual running a business in their own right. You own it and are personally responsible for its debts, and its income is taxed as your personal income. A company is a separate legal entity registered with ASIC. It owns its income and assets, lodges its own tax return and is run by directors with legal duties.
Here is how the two compare side by side.
| Sole trader | Company | |
|---|---|---|
| Legal status | You and the business are the same legal person | A separate legal entity from you |
| Debts | You are personally liable, and assets in your name can be used to pay business debts | The company is generally liable, but directors can be personally liable in some cases |
| Tax | Business income is taxed as part of your personal income | The company pays tax on its own income and has no tax-free threshold |
| Tax return | Your individual return, with a business schedule | A separate company return, plus your own individual return |
| Taking money out | You can take personal drawings | Paid as wages, director’s fees or dividends, not drawings |
| Paperwork | Generally less | More, including ASIC annual review and records of resolutions |
| Numbers | An ABN | An ACN from ASIC, and usually an ABN as well |
Not sure what the two numbers mean? Our guide to ABN vs ACN explains which one you need.
Liability: Who Pays If Something Goes Wrong
This is the biggest practical difference. As a sole trader, business.gov.au says there is no division between business assets and personal assets. That includes your share of joint assets, such as a house or car.
A company is generally liable for its own debts, which is why many people choose it for protection. It is not a perfect shield, though. Directors are personally liable for pay as you go (PAYG) withholding and superannuation debts. Their personal assets can also be at risk if the company cannot pay its debts.
Sole Trader vs Company Tax Differences
A sole trader business is taxed as part of your own personal income. You lodge one individual tax return each year and report business income and expenses on a separate business schedule. You do not lodge a separate return for the business.
A company is a separate taxpayer. It must lodge its own tax return and pay tax on its income, and there is no tax-free threshold for companies. If you are a director or employee of your own company, you still lodge your own individual return as well.
Tax rates change, so we have not quoted them here. The business.gov.au tax comparison links to the current ATO rates. A few rules apply to both structures:
- The same GST registration rules apply whichever structure you choose.
- If you employ staff, you withhold PAYG from their pay and pay super for eligible employees.
- Small business tax concessions are available to any business structure.
Paperwork, Control and Ongoing Costs
Running a sole trader business
A sole trader has full control and generally less paperwork. As of October 2026, business.gov.au says you need to keep financial records, including tax returns, for 5 years, and notify government agencies of business changes within 28 days. If you trade under anything other than your own first name and surname, you also need to register a business name with ASIC.
Running a company
A company has more moving parts. According to business.gov.au (as of October 2026), companies must keep financial records for at least 7 years under the Corporations Act, hold an annual review with ASIC and pay the annual review fee. They also need a registered office and a principal place of business.
Even if you are the only director, certain decisions must be recorded as company resolutions. Directors also take on legal duties, including to:
- act in good faith and in the best interests of the company
- exercise care and diligence
- prevent the company trading while insolvent
Before a company can be registered, each proposed director must have a director identification number, according to ASIC’s company registration guide.
The Address Question Most People Miss
Your structure also changes which addresses the public can see. This matters if you run the business from home.
Sole trader. ABN Lookup only shows the state and postcode of your main business location, not the street address. If you register a business name and your home is your principal place of business, ASIC says only your suburb, state and postcode appear on the public register. The address you give for service of documents does appear in full, though.
Company. ASIC asks for a registered office and a principal place of business. Anyone who searches the companies register can see the principal place of business. If your company is run from home, that is your home. Directors’ home addresses also appear on the register. ASIC lets officeholders who are worried about their safety ask for their residential address to be hidden.
The registered office does not have to be where you work. ASIC says it can be someone else’s address, such as an accountant’s office, if you keep the owner’s written consent. That is where a virtual business address helps: it can be your registered office, so official mail goes to a staffed address. It will not hide a home that is your principal place of business. Our guide to the principal place of business vs registered office covers this in detail.
Which Structure Suits Your Business?
There is no single right answer, but these questions help frame the conversation with your accountant:
- How much risk does the work carry? If a claim or debt could exceed what you are comfortable losing personally, a company’s separate legal identity may matter.
- How much admin can you handle? A sole trader structure is simpler and cheaper to run.
- Do you want to bring in partners or investors? A company can issue shares to other people.
- Where is the business really run from? If it is your home and you are a company, that address is on the public register.
You can also start as a sole trader and change later. Business.gov.au has a guide to moving from a sole trader to a company.
This is general information, not tax or legal advice. Check your situation with your accountant, the ATO or ASIC.
Whichever way you land on sole trader vs company, sort your business address early. A virtual office in Hunters Hill gives you a professional street address for mail and ASIC registered office use. If you want a real workplace that can be your principal place of business, our private offices are in the same building.
Keep your business mail away from your front door
A Hunters Hill virtual office starts at $20 a week + GST, with mail handling and an address you can use for ASIC registration.
See virtual office plans or call 0424 953 774
