Being my own boss sounds awesome. People begging me for work would be the sweet life. ABN is free, name registration $35 a year, and then easy street.
But what are the realities of being a sole-contractor, doing all of your work on a mini contract and invoice basis, trying hard just to hit even median wage in profits probably a lot of them. So any independent plumbers or freelance graphic design people or anything can share what their path to easy street was like?
Research marketing consultant and junior level graphic design capable of doing what plenty of small businesses with a low design budget need.
Touche!
PS: Too true a chart, with a pinch of personal hindsight…
Some notable Sole Trader points:
- Has unlimited liability - all your personal assets are at risk if things go wrong. Your assets can be seized to recover a debt.
- You can employ people to help you run your business. There are compulsory obligations that you must comply with, such as workers' compensation insurance and superannuation contributions.
- You can't split business profits or losses made with family members and you're personally liable to pay tax on all the income derived.
So let's say $700 a year insurance on top of the $35 a year business name registration fee?
Sorry, not too sure about pricing, someone else would need to share their experience on that. Just wanted to point out some important things to consider as sole trader that's all.
I got $5m public liability from NRMA for $23 a month. Personal insurance will cost more, but the only must is public liability.
Demons, sulphur, the Winchesters, Castiel ….
oh sorry SOLES not SOULS
Umm IDK then :(
Hard work
It's definitely not easy street. The best advice is one you most likely have already heard. DON'T quit your full time job.
My wife has her own business and after a few years it's starting to grow and it has taken off this year.
A few things I have had to consider in my first 6 weeks as a sole trader:
not everyone pays on time, some not at all.
not everyone pays on time, some not at all.
second this
not everyone pays
on time, some not at all
Fixed for you
This is what I’d expect, unpaid invoices and powerless to compel payment.
Has unlimited liability - all your personal assets are at risk if things go wrong. Your assets can be seized to recover a debt.
This is the main one. Don't make the mistake of thinking it cannot happen to you. There are much better arrangements for business that I have not done but I assume there is some expense involved beyond being a sole trader whereby your personal assets are not at risk.
As far as I know tradies in many areas are raking it in at the moment as the drones increasingly head to University meaning less plumbers.
Australia is suffering a skills shortage crisis, my friend sent me a phamplet from Ireland, they are offering relocation fees, air fares and 2 years work to people prepared to come to Australia as plumbers, electricans and bricklayers.
Starting to sound like posters from early colonial days
There are much better arrangements for business that I have not done but I assume there is some expense involved beyond being a sole trader whereby your personal assets are not at risk.
I believe that situation would be forming a company since it would be a separate legal identity. Startup and administrative load would be higher though, and would be subject to company tax instead of personal income tax. Another way would be insurance, but it's hard to insure cost-effectively for every single situation, as far as I'm aware.
Difficulty getting home loans.
The money you invoice and collect on is obviously pre-tax.
Do yourself a favour, and put a percentage of this (say 30%) into a separate account, so that you're not caught short at tax time.
If you register for GST, do the same with the GST collected.
I used to do sole trading, and had an easy time. My ex-BIL did sole trading, but spent all the income on his personal pursuits. Got into trouble with the ATO. A client of my wife's had to sell his house to settle his tax bill.
I’ve heard many stories of people spending small company money on themselves, even gambling with company money.
A lot of the clients of the firm that my wife works at have these sorts of issues.. It doesn't help that most of their clients are meatheads who really shouldn't be in charge of anything more than their lunch money.
Is your wife Zuckerburg?
Contemplating working 60+ hours a week for yourself instead of 38 for someone else? I would factor in that you want to be making at least 30% more an hour to be close to even compared to normal full time employment.
That's a good point. If I'm worth 64k a year at 38 hours per week, then that'd be like 100k I could have worked for instead somewhere else a full-time job that also asked 60 hours a week for the same skillset. And that has to be 100k profit (as sole-traders can't draw their own salary from their own business, as they are the business) for it to make sense per hour. And that's not including benefits and basic things like insurance either.
Don't forget income protection insurance in case you're sick/ injured and can't work since you won't get any sick leave entitlement.
And factor in a % premium if you're comparing to a full time salary rate to cover for the lack of any leave entitlements (whether it's the occasional sick days or annual leave).
I could fake my own sick days and draw from my own insurance policy instead of working?
don't think insurance covers the odd sick days… hence anyone not on a salary (e.g. casual) needs to be compensated through a higher hourly/ daily rate
That's one hell of a sickle. AFAIK income protection policies all have 30+ day waiting periods before they come into effect. Won't be surprised if there's a ton of medical paperwork involved too.
It depends on the industry. What industry are you in?