NSW Starting Online Business as Sole Trader - Risks of Personal Assets

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emilytan

Member
7 May 2019
1
1
1
I am planning to start an online business selling products to customers. I have decided to operate as a "Sole Trader" for the start.
In the business.gov.au website, I went through the "Key Aspects of being a Sole Trader" and came across this sentence: Has unlimited liability - all your personal assets are at risk if things go wrong. Your assets can be seized to recover a debt.
My question is: What is the definition of "personal assets" because my concern is will it affect joint bank account with my partner (as in recovering debt from our joint bank account)? If yes, how will it affect and what I can I do to prevent the joint assets (bank accounts, house, bonds) from being affected?

Thanks in advance.
 
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SaulGoodman

Well-Known Member
11 March 2019
19
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Personal assets is anything you own, either jointly or entirely, so yes that includes your bank account etc. I don't understanding your question relating to preventing the assets from being seized in the event you incur a debt. The preferred way to do it is to setup a Pty Ltd company, that way your liability is limited to the assets of the company (unless there is fraud etc.). Hope that helps
 

Ray

Member
8 June 2019
1
0
1
You are "personally" responsible for every aspects of the business as a Sole Trader - including it's debts etc. Your name will be used on contracts and so on. If someone has a problem, you personally will be who they came chasing.

Pty Ltd is the way to go. Even for a single man operation I wouldn't start a business any other way. It's slightly more expensive to setup and mange but that extra cost is like insurance I guess. In the normal course of business, you personally are protected. As above though, just don't get caught doing anything dodgy eg. fraud.

Having said that, being a brand new Pty Ltd you are highly unlikely to get any finance (if you need it) without providing a personal guarantee. So something to bare in mind is that a finance company may want you to become a guarantor (personally) and that means putting your personal assets on the line (house, car etc).

If you don't need finance and can bootstrap the startup of the company yourself, do yourself a massive favour and create a Company. You'll save yourself many headaches in the future as well.