Should I transition to a company?

At My Business Keeper, we believe good decisions start with clarity. If you’re wondering whether moving from a sole trader or partnership to a company structure is right for you, consider these three key factors:

1. Commercial advantage: Is the market demanding it?

Are you working with large organisations, mining companies, or principal contractors who only engage with companies to reduce their own legal and financial risks?

If the answer is yes, incorporating may open doors to contracts and opportunities otherwise unavailable.

Tip: Ask your key clients directly if company status is a requirement for ongoing work.

2. Tax efficiency: Is there a financial benefit?

Companies offer a fixed tax rate (currently 25% for base rate entities), which can be lower than the marginal individual tax rates.

The trade-off is additional compliance costs (ASIC fees, financial reporting, tax return preparation).

We can help you run the numbers to see if the potential tax savings outweigh these extra costs.

Example: If your profits consistently exceed $120,000, it’s worth reviewing the numbers closely.

3. Asset protection: Do you need commercial distance?

Operating through a company can create a layer of separation between personal assets and business liabilities.

However, it’s crucial to understand that this protection is limited by directors' duties and personal guarantees under Australian law.

Directors can still be personally liable for insolvent trading, breaches of duty, and certain tax debts.

For more, refer to the Corporations Act 2001 (Cth) – particularly Sections 180-184 on directors’ duties.

Still unsure? Let’s talk.

We can provide additional information that will help you weigh up the options and make a more informed decision.