6 Signs A Tradie Should Stop Being a Sole Trader and Move to a Company
If you’ve been running your trade business for a while and eventually things pick up, the question we always get asked is:
“Should I move from being a sole trader to a company?”
This decision usually becomes urgent when your tax bill grows, your jobs get bigger, or you start thinking about protecting your personal assets. Here’s a practical guide to help you decide.
1. YOU’RE STARTING TO EARN SOME SERIOUS MONEY
There’s no magic number, but most tradies hit a point around $120k to $150k in net profit each year. This is where being a sole trader starts to become less efficient.
At higher income levels, your personal tax rate increases. A company doesn’t magically reduce tax, but the flat 25 percent company tax rate gives you flexibility to retain profits, pay yourself strategically, and plan for growth.
Tradies who switch often say:
"I wish I had done this earlier"
2. YOU want better protection for personal assets
As a sole trader, you are the business. If something goes wrong on a job, a dispute arises, or debt accumulates, your personal assets could be at risk.
A company creates a legal separation between you and your business. It is not a perfect shield, but it provides a layer of protection, especially for tradies working high-risk jobs or with subcontractors.
With a company in place, assets such as your home, investment properties and other assets are safer, in the event something goes wrong.
Tradies have a much higher risk of legal action than any other industry
3. You Are Hiring Staff or Subbies
Hiring apprentices, casual workers, or subcontractors adds complexity. A company structure makes managing this simpler, including:
Payroll and super
Workers compensation and insurance
Job cost tracking and compliance
On top of all that, clients notice. A registered company gives your business credibility, especially for larger commercial projects or government contracts. They see that you are established, professional, and serious about running your trade business properly.
For most tradies, this is one of the biggest triggers for making the switch, once you start hiring, a company structure can save you time, stress, and headaches (and tax!)
4. You Want a Professional Brand
As your business grows, you might expand your brand to include:
A team
Marketing that goes beyond your personal name
A brand that can scale
A company structure supports your growth. It makes you look professional, helps with finance approvals, and sets you up to eventually sell the business if desired.
Expanding your team is much simpler in a company
5. Cleaner Finances for Better Cash Flow
Separating personal and business finances can be a game changer. With a company you get:
Clearer cash flow visibility
Easier bookkeeping and BAS preparation
Better records for lenders and finance applications to expand the business with new equipment.
Improved business decision-making
Switching to a company forces a clean separation between you and the business. It enables much better financial decisions and a clearer understanding of business performance.
Most tradies feel more in control within weeks of switching.
6. Access Bigger Jobs and Contracts
Commercial builders, councils, and government contracts often prefer dealing with companies. Switching to a company can make you eligible for bigger projects and tenders.
If you are serious about your business and want bigger jobs, a company is the way to go.
Sole traders always lose out on bigger contracts
Is now the right time?
You’re likely ready if:
Your net annual profit is around $120k to $150k or more
You want asset protection
You are hiring or managing a team
You want to grow a brand
You want more tax planning options
You are bidding on commercial jobs
If you answered yes to one or two of these, it is a sign to review your structure.
Want to learn more?
At Refresh Advisory, we work with tradies all over Australia to make sure they are operating in the best tax structure for them as the right choice can save you tax, protect your assets and set you up for growth.
If you are still unsure, or want to learn more, you can get in contact with us today!