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Sole Trader or PTY LTD? Starting fresh, help appreciated.

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T

TRH

Joined
13 July 2023
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Hello all,

New to the scene here but I am ready to make the move from a part time hobby to a semi full time side hustle. Happy to hear some personal experiences with setting up a new trading business via Sole Trader vs. Pty Ltd.

Possibly some first hand pros and cons? What do you prefer? What is normal practice? etc...

I have done my basic reading online about the 2 but want a more personal take on the topic.

Regards,

T
 
TRH said:
Hello all,

New to the scene here but I am ready to make the move from a part time hobby to a semi full time side hustle. Happy to hear some personal experiences with setting up a new trading business via Sole Trader vs. Pty Ltd.

Possibly some first hand pros and cons? What do you prefer? What is normal practice? etc...

I have done my basic reading online about the 2 but want a more personal take on the topic.

Regards,

T
Click to expand...

I think personal circumstances often dictate the appropriate structure, but for me I have a discretionary trust controlled by a corporate trustee (pty ltd). the trust has some personal beneficiaries but also a corporate entity (Pty Ltd) as a beneficiary. Trust is the main trading/investment vehicle and was chosen for asset protection and several tax benefits. Corporate beneficiary is used to retain certain income/profits from the trust (this is done for tax purposes). Main downside I've found with this arrangement is that entering into arrangements with third parties (brokers, banks etc) can be a bit more tedious (as compared to sole trader) but once those arrangements are in place it makes no day to day difference. I have been toying with the idea of moving from a discretionary trust to unit trust to provide an easy way of controlling beneficiaries entitlements.

As I said--I don't think there is a "normal practice" I think your structure will depend on what you are trying to achieve. I did find it absolutely invaluable talking through possible structures with my lawyer and accountant. Get it wrong and it could be very costly down the track.

Good luck
 
TRH said:
Hello all,

New to the scene here but I am ready to make the move from a part time hobby to a semi full time side hustle. Happy to hear some personal experiences with setting up a new trading business via Sole Trader vs. Pty Ltd.

Possibly some first hand pros and cons? What do you prefer? What is normal practice? etc...

I have done my basic reading online about the 2 but want a more personal take on the topic.

Regards,

T
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I can't offer much, but I think incorporation becomes worthwhile above a certain annual income. About 250k, is what I remember.
 
Gringotts Bank said:
but I think incorporation becomes worthwhile above a certain annual income. About 250k, is what I remember.
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Not these days...you can buy a pty ltd online for a few hundred bucks. your annual asic fee is a few hundred bucks and if you have the time you could lodge your own tax return without too much trouble or use an accountant who (depending on the trading complexity) could do it for $500 to $1000. Again, depending on your personal circumstances using a pty ltd as your vehicle might well be viable even if you're investing significantly less than $250k
 
If you're cranky about handing over 47% of your income to the ATO ( like me ) consider donating the excess to any number of worthwhile charities .
As was mentioned last week on the FMG thread , on each green hundred dollar bill , you still 'lose' the difference but have the extra satisfaction of not wasting $47 on some pollie's pet project .
 
Perhaps you should also consider what happens if you fail, if a BIG war was to start or the Ass falls out of the market it is best if you have some sort of capital gain to offset your stock losses.

If you have an investment property with $100k capital gain sitting there and you have a bad year on the market, then you could take the opportunity to sell the IP and offset the loss/gain to reduce CGT

I assume they would need to be in the same tax entity so if the IP is in your name then trade in your name, if in trust then trade in trust(subject to the right wording in your rules)

Need to consider the big picture over all your assets and in all circumstances,
 
dyna said:
If you're cranky about handing over 47% of your income to the ATO ( like me ) consider donating the excess to any number of worthwhile charities .
As was mentioned last week on the FMG thread , on each green hundred dollar bill , you still 'lose' the difference but have the extra satisfaction of not wasting $47 on some pollie's pet project .
Click to expand...
Doesn’t the 30% cap on company tax apply here?
 
MovingAverage said:
My single reason for living and what gets me up every day is doing my utmost to ensure ******** pollies get the absolute minimum from me...thieving bastards--all of them
Click to expand...
Keynote speaker the late Mr Kerry Packer giving it to the Senate Inquiry some years ago. Masterful
 
TRH said:
Hello all,

New to the scene here but I am ready to make the move from a part time hobby to a semi full time side hustle. Happy to hear some personal experiences with setting up a new trading business via Sole Trader vs. Pty Ltd.

Possibly some first hand pros and cons? What do you prefer? What is normal practice? etc...

I have done my basic reading online about the 2 but want a more personal take on the topic.

Regards,

T
Click to expand...
Good evening TBH and welcome to ASF
Some very wise and astute people reside here and once you get to know who is who the advice will invaluable.
I have been a great believer in DYOR and trust no one when it comes to investing the hard earned.
Listen and learn that is a must.
Best of luck and keep on posting.
 
MovingAverage said:
and what k. packer said at that senate inquiry all those years ago is still very relevant today.
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Yep Pay no more than 1c in the dollar and even that is too much, when asked how come, he retorted, because you barstards will only waste it.
I remember watching in awe as he pulled the Inquiry apart and into shreds. Into the mincer they went and came out as shark bait.
 
farmerge said:
Yep Pay no more than 1c in the dollar and even that is too much, when asked how come, he retorted, because you barstards will only waste it.
I remember watching in awe as he pulled the Inquiry apart and into shreds. Into the mincer they went and came out as shark bait.
Click to expand...
it is just such a shame that we don’t have more folks like k. packer giving to those bastards. world is full of sycophants these days
 
MovingAverage said:
it is just such a shame that we don’t have more folks like k. packer giving to those bastards. world is full of sycophants these days
Click to expand...
To many suffer Jellyfish back bone, I think.
I do a fair bit of work for a retired Fed Senator, and it is a pity he's not in Parliament now. Wasn't afraid to call a spade a shovel etc
 
farmerge said:
To many suffer Jellyfish back bone, I think.
I do a fair bit of work for a retired Fed Senator, and it is a pity he's not in Parliament now. Wasn't afraid to call a spade a shovel etc
Click to expand...
Been great chatting MovingAverage, but the day has been a long and hard one.
The Slumber King is calling
 
MovingAverage said:
I think personal circumstances often dictate the appropriate structure, but for me I have a discretionary trust controlled by a corporate trustee (pty ltd). the trust has some personal beneficiaries but also a corporate entity (Pty Ltd) as a beneficiary. Trust is the main trading/investment vehicle and was chosen for asset protection and several tax benefits. Corporate beneficiary is used to retain certain income/profits from the trust (this is done for tax purposes). Main downside I've found with this arrangement is that entering into arrangements with third parties (brokers, banks etc) can be a bit more tedious (as compared to sole trader) but once those arrangements are in place it makes no day to day difference. I have been toying with the idea of moving from a discretionary trust to unit trust to provide an easy way of controlling beneficiaries entitlements.

As I said--I don't think there is a "normal practice" I think your structure will depend on what you are trying to achieve. I did find it absolutely invaluable talking through possible structures with my lawyer and accountant. Get it wrong and it could be very costly down the track.

Good luck
Click to expand...
The Last Paragraph is the MOST IMPORTANT of all.
 
TRH said:
Thank you all for the advice. After reading some of the complexities of the options, I think I will speak to my accountant for some pointers on how to move forward.

T.
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Brilliant n it's the Right Move.
Read all the posts, learn n understand a few, jot down your Questions, take it to Accountant.
Worth the money to get it Right from the start.
 
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