Guide
Sole trader vs company: liability, cost and insurance
The structure you choose decides who is liable when something goes wrong, what it costs to set up, and which insurance matters most. Here’s the difference, from business.gov.au, and what it means for your cover.
- Liability, set-up cost and control compared
- Which covers each structure needs
What’s the difference?
A sole trader is personally liable for the business’s financial and tax debts, with no division between business and personal assets. A company is a separate legal entity: business.gov.au says the company is generally liable for all business debts, and its assets belong to the company rather than its directors or shareholders.
That protection has limits. Directors are personally liable for the company’s PAYG withholding and superannuation debts, and if a company can’t pay its debts, a director’s personal assets can still be at risk in some circumstances.
Sole trader and company, side by side
| Sole trader | Company | |
|---|---|---|
| Who is liable for debts | You, personally. | The company, generally. Directors remain liable for PAYG withholding and super. |
| Personal assets | No division between business and personal assets. | Company assets belong to the company and can be sold to pay its debts. |
| Set-up cost | Fewer set-up costs. | Higher. Registering a proprietary limited company costs $636. |
| Control | Full control. | Shared with other directors, if there are any. |
| Tax | Business income is treated as your individual income. | Money the company earns belongs to the company, which lodges its own return. |
Talk to an accountant about the tax side. This page is about liability and insurance.
How many of each, and which last
Companies are now the most common structure. At 30 June 2026 the ABS counted 1,271,197 companies, 848,300 sole proprietors, 498,865 trusts and 196,015 partnerships among actively trading businesses. Sole proprietors grew 3.1% over the year.
| Structure | Actively trading businesses |
|---|---|
| Companies | 1,271,197 |
| Sole proprietors | 848,300 |
| Trusts | 498,865 |
| Partnerships | 196,015 |
Survival differs too. Of the sole-proprietor businesses that entered in 2022-23, 39.6% were still trading in June 2026, against 56.1% of companies. That gap has many causes, but it is one reason a company’s insurance history and claims record are asked about separately from the director’s own.
What it means for insurance
Changing structure changes who gets sued. It doesn’t remove the risk, so both structures hold the same core covers.
| Cover | Sole trader | Company |
|---|---|---|
| Public liability | Essential. A claim comes at you personally. | Essential. A claim comes at the company. |
| Professional indemnity | If you give advice or a professional service. | Same. |
| Directors and officers | Not relevant. | Covers directors personally for claims about how they ran the company. |
| Income protection | Often the most important cover: no sick leave, and workers compensation usually can’t cover you. | Useful for working directors. |
| Workers compensation | Once you employ someone. | Once you employ someone, including working directors in some states. |
How to compare cover for either structure
Sole trader vs company questions
Does a company protect my personal assets?
Generally the company is liable for its debts, but directors are personally liable for PAYG withholding and super debts, and personal assets can be at risk if a company can’t pay its debts in some circumstances.
Do sole traders need public liability insurance?
It isn’t a general legal requirement, but a claim against a sole trader is a claim against you personally, so most hold it, and clients and sites ask for it.
What does it cost to set up a company?
business.gov.au lists $636 to register a proprietary limited company, plus ongoing obligations. A sole trader has fewer set-up costs.
Can a sole trader get workers compensation for themselves?
In most states, no. Workers compensation covers employees. Sole traders usually look at income protection or personal accident cover instead.
Does changing from sole trader to company change my insurance?
Your policies need to name the new entity, and directors may want directors and officers cover. The core covers stay the same.
Compare the covers
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