Changing From a Sole Trader to a Company

Thinking about going from a sole trader to a company structure? The move can help you manage risk, win bigger clients, and plan for growth—but it also changes how you’re taxed and what you must report.

As of June 30 2025, statistics from Australian Business Entries counted 1.21 million registered companies and 0.82 million sole traders—making up roughly 44% vs 30% of all actively trading businesses. So if you’re changing from a sole trader to a company, you’re in good company.

Here, we’ll cover the pros and cons, and break down how to go from sole trader to company.

Key takeaways

• A sole trader structure is simple and low-cost; a company structure means you face less liability but makes compliance and tax more complicated.
• Knowing when to make the move from a sole trader to company structure depends on your growth, risks you’re facing, and your future ambitions.
• Changing from a sole trader to a company structure involves formal steps such as notifying Australian Securities & Investments Commission (ASIC), re-applying for an ABN, and opening a separate business bank account.
• After you’ve made the transition, your legal and compliance obligations change.
• If you’re already using QuickBooks for sole traders, the move will be much easier.

Sole trader vs company

There are significant structural differences between these business structures. Here, we’ll cover exactly what will change if you’re going from sole trader to a company.

What is a sole trader?

A sole trader is the simplest business structure. One individual has full control over the business and is taxed on their individual income. However, as a sole trader you are personally liable for all business debts, which means your personal assets (such as your house or your car) can be at risk if things go wrong.

Weighing up if this is still the right structure for your business? Learn more about the pros and cons of being a sole trader.

What is a company?

When you set up a company, you create a separate legal entity that can shield your personal assets from business debts.

However, while companies benefit from a lower company tax rate than individual tax rates, you’ll also need to cover the initial set-up costs, use different cash-flow management strategies, and face more compliance obligations.

What are the differences?

• Legal liability: A sole trader is personally liable for all business debts; a company shields directors’ personal assets (subject to duties and risks).
• Exposure to risk: Sole traders bear all risk of the business; companies provide a structural barrier (but directors still have responsibilities).
• Tax rates: Sole traders pay personal income tax on business profits; companies pay the company tax rate.
• Tax filings: Sole traders lodge an individual income tax return; companies lodge both a company tax return and directors/owners may lodge their own returns.
• Dividends: Sole traders cannot issue dividends to themselves; companies can distribute dividends to shareholders.
• Compliance & reporting: Sole traders have fewer compliance obligations; companies must comply with the Corporations Act 2001, ASIC reviews, financial records, and more.
• Control & decision-making powers: Sole traders have full control; companies often involve shareholders, directors and formal governance.

Is it time to change your business structure?

Here are reasons why you might consider going from a sole trader to a company, and reasons why you might hold off:

Why you might consider changing from a sole trader to a company structure:

• Mitigating liability and risk: If your business is exposed to legal or financial risk, you may want to move from a sole trader to company structure to protect your personal assets.
• Sustained business growth: When profits and turnover are rising, the tax advantages of running a company may become more attractive.
• Expanding the business: If you plan to bring in partners or investors, a company structure is usually more suitable than a sole trader setup.
• Attracting investors or external capital: A company structure provides a clearer structure for share-holding and governance.
• Improving opportunities: A company structure can give you more credibility with larger clients or financial institutions—so you can grow faster.

Why it may not be time to change your structure:

• Retaining total control of operations: If you prefer full autonomy and less formal governance, sticking with a sole trader setup may suit you better.
• Experiencing limited growth: If your business is small, niche, or not expected to expand soon, the extra compliance requirements of a company structure may outweigh the benefits.
• Time constraints and cost: Changing structure takes time and money. If you’re stretched for resources, staying as a sole trader might be the right choice for now.

How to go from sole trader to company structures

If you’ve decided that going from a sole trader to a company is right for you, you’ll need to complete a few important steps to set up your new structure. Here, we’ll cover what to register and update. Work through each step carefully, and seek legal and financial advice when you need it.

1. Notify ASIC and get your Australian Company Number (ACN)

The first step is to obtain an ACN (Australian Company Number) by applying for incorporation on the ASIC website. To confirm your restructure from sole trader to company, simply lodge the required form and pay a fee.

2. Register your company name and ABN

Once your business is incorporated, register your company name and apply for a new ABN (Australian Business Number) via the Australian Business Register. You can’t reuse your sole trader ABN—cancel it, then register for any required taxes (e.g. GST and PAYG).

3. Open a business bank account

It’s important to keep your business bank account separate from your personal account. It keeps your bookkeeping easy and makes it simple to stay compliant. Some benefits of having a business account include:

• Clear records: Keep personal and company money distinct for cleaner records, easier audits, and fewer errors.
• Simpler bookkeeping: Track revenue and reporting obligations with less admin.
• Added credibility: Look more professional to clients and lenders.

4. Establish governance, shares, and reporting structures

The next step is to create the framework for how your company operates.

• Decide on share classes and issue shares
• Appoint directors
• Document shareholder agreements
• Set up a decision-making processes

It’s also a good idea to establish meeting schedules and record-keeping systems from the start, so it’s clear who is responsible for each area of running the company.

5. Update all business details and documents

All of your business details and documents must reflect the company entity. Here’s a quick checklist:

• Identity details: Company name, address, ABN, and ACN on your website, stationery, email signatures, and listings.
• Commercial documents: Contracts, invoices, and quotes.
• Licences and registrations: Shift policies, licences, and registrations from you as a sole trader to the company.

6. Transfer assets and update contracts

Move relevant assets like equipment and IP from your name into the company. This can trigger tax consequences, so seek professional advice early.

7. Notify stakeholders and clients

Tell customers and lenders about the change from sole trader to company structure. Share the dates the switch will become effective, update payment information, and notify them of any updated terms. Clear communication is important at this stage to prevent payment delays and maintain trust.

8. Review and update insurance policies

Your level of risk changes under a company structure, so make sure your insurance policies are up-to-date. Review or set up:

• Liability insurance for directors.
• Workers’ compensation insurance if you employ staff.
• Business interruption insurance to protect cash flow.

9. Review financial and tax obligations

Company obligations are different to what you might be used to as a sole trader. Be sure to set up PAYG withholding for employees and prepare a company tax return in addition to any personal filings. It’s important to stay compliant with ASIC and the ATO requirements—remember, you could face significant penalties for reporting incorrectly.

Understanding legal and tax liabilities

Once you’re operating through a company, your legal and tax liabilities change:

Make the transition easier with QuickBooks

Whether you’re staying put for now or moving ahead with incorporation, Intuit QuickBooks can help at every stage. 

If you’re a sole trader, start with Intuit QuickBooks for sole traders to track income, expenses, and GST. As you scale, you can rely on us to make payroll and BAS reporting easy through our business tools like real-time cash flow management. Align your systems early to make changing from a sole trader to a company smoother.