There’s a bit of confusion between the name “sole trader” and “self-employed”. Some use them interchangeably; others say they should be used exclusively. And still others would say that “sole traders” are really “self-employed” professionals with proper business cards—but “self-employed” professionals don’t have to be “sole traders”.
So which is which? Let’s begin by defining what a sole trader is.
A sole trader is, essentially, a person who runs his or her own business. As a sole trader, you can run your business as a self-employed person and are solely responsible for its financial success. Or, you can employ a team to help you with your work and projects.
Doing Business as a Sole Trader
A sole trader is a simple business structure that generally requires less paperwork, footwork, and has lower costs. You can operate your business alone, taking on work or projects full time or part-time. You may also employing a team to work under your management and supervision.
As a sole trader you may need to:
Sole Trader Tax Responsibilities
If you’re a sole trader, you will be taxed as an individual and report your business income in your individual tax return. Your tax responsibilities may include, but not be limited to:
So—is it Sole Trader or Self-Employed?
Key difference between being a sole trader and being self-employed is this: being a sole trader refers to the structure of your business; being self-employed refers to how you pay your taxes. In this context, if you’re self-employed then you’re basically running a business as a sole trader, whether you consider yourself a business owner or not.
Would you like to know more about how to register yourself as a sole trader? Or are you a backpacker and are wondering if you should identify as a sole trader (or as a self-employed professional)? Click this link and we’ll help you figure that out.