What Sole Traders Must Consider When Thinking Of Expanding

What Sole Traders Must Consider When Thinking Of Expanding

Across the world, and certainly in Australia, some of the household names we know as huge corporate companies started life as just one person operating as a sole trader. Apple was started in a garage and Virgin’s embryonic existence consisted of Richard Branson selling magazines to students. The key point is that being a sole trader should never be considered as a negative in the business world, especially as commercial law provides options to expand and grow.

A key advantage of being a sole trader is that you are answerable to nobody. You are the sole proprietor and so do not have a board or shareholders you have to keep happy. Sole trading is relatively simple in terms of administration and in complying with commercial and taxation law. However, there are disadvantages, with the main ones being you are personally responsible for any debt which accrues and that includes the risk of your personal assets being sold to pay for them.

Let is us stick with positivity and the possibility that your sole trader business is successful, grows significantly, and you get to the stage where you consider changing from being a sole trader to a partnership, or a company with help from Culshaw Miller Lawyers.


A partnership is a business where two parties each agree to share the profits and the risks of the business. Partners may come in several forms such as your spouse, a family member or friend wanting to go into business with you, often by investing in your business.

It could also be another sole trader within your business sector joining forces with you to maximise resources and efficiency. It is key that a legally binding partnership agreement is signed so that both parties are protected. For this, we recommend you seek the help of a commercial lawyer to draw up the partnership papers. Whilst partnerships work in certain situations, the most likely next stage for sole traders is to create a company, which we will discuss next.


A company within the realms of commercial law is a legal entity in its own right. Whilst individuals such as the company’s owner, directors or shareholders may have the right and means to enter into agreements and contracts on behalf of a company, in most scenarios it is the company itself that is legally entering into them.

One huge difference this makes compared to some traders and partnerships is that it is the company, which is liable for any debts and obligations, not the individuals running the business nor owning it. There can be some exceptions especially for directors of a company who prove to have acted unlawfully, but for the most part owners and directors are protected. This means that your personal assets are not at risk should debts need to be paid on behalf of the company.

Forming And Running A Company

For a company to be formed and to be run in compliance with regulations set by the Australian Securities and Investments Commission (ASIC), 6 core requirements must be met.

  • Establishing a registered office and place of business
  • Appointment of one or more directors
  • Creation and maintaining of a business name
  • Keeping of necessary financial records
  • Advising the ASIC to any changes
  • Pay ASIC fees

There is no need for a ‘board’ of directors as for small businesses there can be just one director who is invariably the person who was running the sole tradership. In addition, a small business will usually be designated as a proprietary limited company, meaning it can have shareholders who have part-ownership, but the number is limited to 50 people who are not employees of the company.