Sole trader to company: what changes on day one?

Set a date the business can actually work with

A company is a separate legal entity. You can keep trading under the same public-facing name if you arrange the appropriate business name transfer, but the company cannot take over your sole trader ABN. It will need its own ABN and tax file number. Check which registrations the company needs, including GST and PAYG withholding where applicable. The Australian Government’s guide to switching from sole trader to company lists the main registration steps.

Choose the trading switch date with your advisers, then work backwards. Leave time for the company bank account, card terminal or online checkout, invoicing and any approvals you need. If the bank account isn’t open or the landlord hasn’t agreed to a change that requires consent, review the date instead of assuming those details can be sorted out after the switch.

Get the first company invoice right

Set up the company’s invoice template with its correct details, ABN and bank account. If GST applies, make sure the software is set up for the company’s registration. Test a new invoice before you send one to a customer. Update any payment links, direct debits, subscriptions and supplier accounts you’ll use under the new entity.

Make a separate list of work already quoted, deposits already collected and invoices still unpaid. For example, if the café invoiced a catering order as a sole trader before the switch, don’t automatically reissue it under the company’s ABN just because the customer hasn’t paid yet. Confirm which entity made or will make the sale and how the payment should be recorded. Keep the old records available for final reporting.

Work through what needs to move

Contracts and licences. Pull out the lease, key supplier contracts and any permits. Check whose name is on each one, whether it can transfer and whose consent is needed. Ask your insurer which entity is covered and from when. If there’s a personal guarantee, ask whether it continues rather than assuming the company structure cancels it.

Equipment and stock. Make a list of what the company will use: the coffee machine, fridge, inventory and any financed or leased equipment. Record who owns each item and whether there’s finance outstanding. Moving assets can have tax consequences, and any relief depends on the circumstances. Work out how each asset will be treated before changing its ownership or entering it in the company’s books.

Staff and payroll. If staff will work for the company, review their contracts, entitlements, payroll setup, super and workers compensation cover before the change. Don’t assume a new payroll account means existing employee obligations start again. Ask your advisers what applies to the transfer.

What to bring to your accountant before choosing a date

• Your proposed switch date and current ABN, registrations and business name.
• Unpaid invoices, deposits, open jobs and supplier bills.
• The lease, key contracts, insurance and any personal guarantees.
• An equipment and stock list, with finance agreements and ownership details.
• Payroll records if you have staff, plus the latest accounts and BAS.

If you’re stopping all sole trader activity, check when to close out any final obligations and cancel registrations. If you’ll continue another activity personally, tell your accountant so they can review which registrations you still need. Also discuss how you’ll pay yourself from the company; don’t treat its account as a personal spending account.