Sole Trader vs. Company/Trust: Do You Have a Business or Just a Job?

Sole Trader vs. Company/Trust: Do You Have a Business or Just a Job?

The Illusion of Being a "Business Owner"

Many people start a business as a sole trader because it’s the simplest, fastest, and cheapest way to get started. No complex structures, no extra compliance, and minimal setup costs. But here’s the harsh reality—

If you’re a sole trader, you don’t own a business. You own a job.

And that job comes with some major downsides:

• If you stop working, your income stops.

• If you get sick or take a holiday, your business stalls.

• If a client doesn’t pay you, you personally take the hit.

You are the business, which means you’re also its biggest bottleneck.

On the other hand, structuring as a company or trust is designed for time and financial freedom—but it comes with more responsibility, legal requirements, and higher initial costs. However, this structure allows you to create a business that generates income even when you’re not physically working.

The Key Differences Between a Sole Trader and a Company/Trust

A sole trader has complete control but also takes on 100% of the responsibility and risk. You are legally liable for everything in the business—there is no separation between you and your company. If something goes wrong, your personal assets are on the line.

From a tax perspective, sole traders are taxed as individuals, which means as your income increases, so do your tax rates. There are fewer tax advantages, fewer deductions, and no way to split income between different entities.

When it comes to scaling, a sole trader model is hard to grow beyond a certain point. Since you are the face of the business, your earnings are limited by how much work you can personally handle. Even if you hire staff, you are still deeply involved in managing daily operations, handling client issues, and making every decision yourself.

Now, compare that to a company or trust structure.

A company is a separate legal entity—which means your personal assets are protected. The business itself carries the liability, so if things go wrong, your personal finances aren’t immediately at risk.

Companies also get better tax benefits. Instead of being taxed at high personal income rates, company profits are taxed at a lower business tax rate. There are more deductions, income-splitting options, and ways to reinvest profit back into the business.

Most importantly, a company allows you to scale. You can hire a team, set up systems, and remove yourself from daily operations. The business can run without you—which means you can step back, expand, or even sell the company in the future.

A sole trader, on the other hand, has no real exit strategy. If you stop working, the business disappears because you are the business.

The Real Difference: Security vs. Freedom

Being a sole trader feels comfortable and familiar. It’s simple, flexible, and easy to manage—but it also keeps you trapped in a cycle of working for every dollar.

A company or trust structure, however, is built for freedom and scale. It allows you to:

• Remove yourself from daily operations.

• Hire, delegate, and automate.

• Separate personal and business liabilities.

• Create an asset you can sell in the future.

But freedom comes at a cost. Moving to a company structure requires taking bigger risks, making larger investments, and building a real business that doesn’t rely solely on you.

Are You Running a Business or Just Working a Job?

Starting as a sole trader makes sense for many people. It’s a low-barrier entry into business. But at some point, if you want true time and financial freedom, you have to shift your mindset from being self-employed to being a business owner.

That shift isn’t easy—it requires letting go of control, putting proper systems in place, and playing the long game.

But in the end, it’s the only way to escape the time-for-money trap and build a business that actually works for you.