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Sole Proprietorship Business Formation

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Discuss about the Sole Proprietorship Business Formation.



A simple business structure is followed by a sole trader. When a business is structured with the sole proprietorship method, there is only a single trader who sets up the business. A personal business can be changed and the structure of the business can be formed according to the own decision of the sole trader (Sitarz, 2000). There is some Victorian act in company law of Australia through and for a business set up those rules are needed to be followed.

Interview between legal advisor and a client

I want to start a sole trader business, which business should I set up?

It depends on, how much money you can afford. If you can afford money to form your own company and there are several functions for considering the structure of a company and those functions are required by you to apply. As per Australian Victorian law, you should follow the ABN look up and pay as sole trader deducting tax from the employees. (The Australian law times, 2002). A sole proprietorship can be of various types. It is an individual business, so you can set up any business like, Financial planner. In this business you have to help various families by telling them how to plan finance after retirement and they also guide people that how to manage employee retirement packages which can be profitable.

What process should be applied to register as a Sole Trader if I set up a business as a, Financial planner?

It is necessary first that you should decide whether your business will run under your own name such as “John Patterson”, or name such as, “Winselet Industries” because separate processes are applied for each registration. If you want to be a financial planner, then you have to incorporate the taxpaying method with corporate registration and there will be personal liability issues such as financial credit and personal tax relationship development with offshore trusts.

What is the process of registration of the business can be done on personal name?

For running a business in a particular name, you have to register an Australian Business Number (ABN). There is some process for applying ABN. When your own personal name would be registered with a company, then you have to obtain Tax File Number (TFN) and Australian Business Number (ABN) and for that you have to visit Australian Tax Office (ATO). This is way to register a business in your personal name.


Which process should I apply to register the business on a specific company’s name?

For registering the business name of the company, the business name should be registered by you following the rules of Australian Securities & Investment Commission. A business name which is already registered in the state cannot be registered by you as per Queensland act of Australia and Australian state law. A trademark should be applied on the company’s name as per legal rules (Queensland statutes, 2002). It is necessary that Tax File Number (TFN), Australian Business Number (ABN) and Australian Tax Office (ATO) should be mentioned properly to register a name of the company of a sole trader.

What may be the result, if I do not register as a Sole trader?

Registration is necessary to be done because; it helps in structuring, keeping assurance a sole proprietorship business legally without any risk. If insurance is needed in a business, then it is important that you should register your company’s name as per Australian law (The Australian law times, 2002). Even all the regulations of state law of Australia should be followed to form a valid proprietorship business.

What should be the capital which I should use in beginning of my business?

The amount should be reasonable at beginning because at beginning throughout 6 to 8 months there will be no profit and revenue collection will also need time. Expenses will be more than your anticipation at primary starting of the business.

What should be the capital venture for financing?

You should follow a transaction method after a product is delivered and venture of financing should be covered with that work as you are doing a business as a financial planner.

To sign a Non-disclosure Agreement (NDA), what should be the prospective dealing with the investors who are investing money for my business?

It is a time consuming matter because now a days, it is hard to get fund raising of counter productivity. Implementation of entrepreneurship is necessary to be followed when capital is needed for investment. The financial help should be taken by bank with the help of business loan for forming a business.

For the share ownership, how much dilution should be given to the investors?

The ownership should not be over-optimized and amount which the investors give should be funded and cash should be grown more to develop the business and this will be profitable for your business.

How many employees should I recruit for the business?

It depends on your business capacity, capital investment and other process but at first there should be less amount of employee in the company because it is needed that the employees should be managed and guided properly, so fewer employees are easy to tackle. The employee capacity, recruitment process, regulations of the business and several other concepts should be followed through which a valid Sole proprietorship business can be followed and set up.


Relevant Laws

When one person forms a business himself which can be operated by him and if the person is responsible for the debt, then Sole proprietorship business formation takes place. In this business there is no separate existence. It has no legal entity but when the business is person trading all the debts and losses is personal responsibility of the sole trader of the company. For setting up a business of a financial planner, there are some rules which have to be followed while registering the company by the sole trader.

Under Victorian law of Corporation act of Australia, there are some legal obligations under Corporations act 2001 (Financial reporting requirements of the Companies Act and Codes, 2003). In a sole proprietorship there is only one director in the company who is liable if any problem occurs in the business. In this case no one can sue the company because it is his personal loss. There are limited employees and some non-employee shareholders who are the part of the business. As per sec 271 of Corporation act the security methods are needed to be followed and registration should be done following the rules of Personal Property Securities act 2009 (Dixon, Oram, & Walsh, 2012).

When the name is getting registered at that time, a name should be chosen by the trader which is memorable and easy to pronounce. That name should not be similar to any state registered company’s name or trademarks. The name should not be offensive and it should be professional and short with functional description. If personal name is chosen as the name of the business then registration is not necessary. Under subsection 3 of Victorian corporation act, registration method is done with the help of ASIC method of Australia should be followed (Australian corporations legislation, 2010). For making the website of the company registration is important and to check the website “MyWebname” is needed to be typed and checked to see the company name after registration. Australian Trade Marks Online Search System (ATMOSS) should be followed to check the registered trade mark. Australian Business Number (ABN) is needed after registering the name because it will help to find the registered name of the company late and that number is the registration proves. Even ASIC Connect Home page has all the registered company names. After registration if the ABN is used in ASIC Connect Homepage then, the registered business name of the company can be found out.  Trade marking should always be used to protect the business name and idea. If the business is needed to be renewed and cancelled later than also ASIC method should be applied.

To protect the business of the proprietorship Victorian law of Australia should be followed. As per that act, there should be intellectual property where some original things of the company should be kept like symbol, words, ideas and designs (Victorian Law Reform Commission, 2001). The intellectual property (IP) can be protected by patents, trademarks, domain names, copyright, and design rights.

Trade marks

Packaging or picture, logo, number, shape, word or phrase can be a trade mark which can be differentiated with the competitors. If the trade mark is registered then, it gives rights to use it across the Commonwealth of Australia; it gives rights to use for commercial purpose; there is a right to sell goods by import export mode. The trade mark helps to follow the personal entity of the company.

The trade mark can be protected by a database known as, “IP Australia ATMOSS database”. The trademark can be applied online by “IP Australia” database.

As per Company act of Australia, if a sole trader has bought a business which already has a trade mark then, he or she needs to transfer the business on their name. The patent lawyer or IPA (Intellectual Property Australia) method is needed to be followed in that case.

For any device, process, substance and device Patent is needed to be followed because without that selling or manufacturing without permission will not be allowed in Australia. As per section 22 of Queensland law, license method is also needed to be followed while manufacturing any products for business purpose. The IP can be protected by IP Australia’s AusPat database. If online it is checked then IP Australia is the site through which it can be protected (The Companies Act, 2007).


From original expressed ideas, the copyright service is used as legal protection. The sound recording, literature, computer programs and other database can be protected by Australian Copyright council.

Design rights

The visual style and appearance of the product is structured through design which should be different then other companies. The packaging and logo should be registered commercially and the logo should get license for selling the product. To protect the design database, IP Australian Design Database (ADDS) should be followed and IP Australia should be followed online.

Domain names

On internet every domain has a unique address which helps customer to get details about the business and the company online by a site. If the registration is done properly then, there will be specific company domain site which will be provided and through that the information can be checked about the company. Every domain name has an IP address which is unique and that is referred through URL.


Registration process

Tax registrations

When a sole trader business is structured, then there will be individual Tax File Number (TFN) and that is important because when income tax return is lodged then, it is necessary (The Companies Act , 2007). When Tax registration is done then, tax file number is important.

Australian Business Number (ABN)

ABN is mandatory to be used because, it collects GST. For registration, Australian Business Register (ABR) is the method which is followed for the sole trader business structure. The labour payment, office holding and several other things is needed to be applied through ABN.

Goods and Service Tax (GST)

If the turnover of the business is %75,000 them Goods and Service Tax (GST) is needed to be given to Australian government as per Australian law (Price, 2002).


When tax return process is used as a sole trader, the person can claim for the tax return following the revenue system. ASIC is the main method used for superannuation.

Employing people

When a person is employed, employee payroll tax and PAYG and superannuation payment mode is used for the employees of the company for financial developer company. The fringe benefits can also be gathered through that process and this should be adopted by the Sole trader.


Recommendation to client

There is some reasonable recommendation which a sole trader should follow to form a valid business (Price, 2002). A business structure should be followed by the sole trader with legal formalities. The lawyer recommends some reasonable steps for those which are described below:

  • Business License- A business license should be obtained by the sole trader to operate the business legally. Necessary application should be given to the county clerk for requirement of the license by the trader for financial developer business.
  • Business Name- For selecting a trade name no obligation are created for sole trader and for embarking the setting of the enterprise the business  name is needed to be registered. Registration process should follow the Victorian corporation law of Australia (Victorian Law Reform Commission, 2001)..
  • Payment of Taxes- Federal taxation requirements should meet the business of the sole trader. As the sole trader is single entity, so he has to bear the taxes himself. As per Schedule C of IRS Form 1040 of Queensland law, the business is carried through the personal income tax system and social security should be used by him with the report of excise taxes and firearm taxes. The federal Employer Identification Number (EIN) should be followed for payment of taxes (Sitarz, 2000).
  • Self-Employment Tax- The sole proprietor has to pay self employment tax with social security forming the IRS principle of business code should be followed with business structure. When tax report is given and self-employment tax is excised then self employment taxation rules are followed in the taxation process.
  • Income tax- In every year, the income tax must be filed and tax refund process should be implied and funds should be fixed on banks by the businessman.
  • Unlimited liability- The accountability, business debt, loss and various other extents are the personal liability of the sole trader.
  • Tax, Superannuation, Expansion, Legal trade and assets with various other things should be followed with several intentions which are legally abided and through which the formation of sole trading should be formed with various validations (Saskatchewan Government Insurance Superannuation Plan, 2011).

In formation of sole proprietorship business there are various methods and functions which are implemented to form the business. As per Corporation law of Victorian act (sec 7), the tax registrations process should be followed by the sole trader because tax registration, ABN, GST, TFN, ATMOSS, EIN, IRS and various other principles which are needed to form the business (Sitarz, 2000). In sole trader business, liability comes if any loss occurs in the business. If the employees and other peoples are affected by any problem then it is essential that he should follow the remedies and the process like ATMOSS remedy through which the employment should be thoroughly covered and as per that remedy process the conduct of business methods should be followed.

In a sole trader business if any harm raises the personal liability comes and no other party is liable for the loss or flaw in the business. As per Queensland law, the right insurance process should be used in a bank account for the safety of the trader. All the safety methods should be followed to secure the sole trader business by giving insurance in time.


In the assignment, various presumptions are followed with several legal rules and regulations (Spadaccini, 2007). This helped to form a proprietorship business which is personal. In this project all the legal rules are suggested by the legal advisor to the client to form the business and various questions are based buy the trader also which gives brief idea about the rules of the sole trader business.


References: (2016). Victorian Current Acts. Retrieved 2016, from

Australian corporations legislation. (2010). Chatswood, N.S.W.

Dixon, M., Oram, N., & Walsh, M. (2012). Personal Property Securities Act. [Canberra]: Australian Government Solicitor.

Financial reporting requirements of the Companies Act and Codes. (2002) (3rd ed.). Canberra.

Price, R. (2002). Employment law in principle. Sydney: Lawbook Co.

Queensland statutes (1962 reprint). (2002) (3rd ed.). Brisbane.

Saskatchewan Government Insurance Superannuation Plan. (2011). [Regina].

Sitarz, D. (2000). Sole proprietorship. Carbondale, Ill.: Nova Pub. Co.

Spadaccini, M. (2007). Business structures. Irvine, CA: Entrepreneur Press.

The Australian law times. (2002) (3rd ed.). Melbourne.

The Australian law times. (2002) (3rd ed.). Melbourne.

The Companies Act of 1961. (2007) (3rd ed.). Brisbane.

The Companies Act of 1961. (2007) (3rd ed.).Brisbane.

Victorian Law Reform Commission. (2001). Melbourne.


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