FINANCE CONSIDERATIONS FOR SOLE TRADERS
There are a lot of benefits to being your own boss, such as the increased flexibility you can build into your life and the freedom to make your own decisions. On the other hand, you also have to take control of your business finances and this is where many sole traders drop the ball.
As a sole trader, you need to assess your need for income protection, personal accident insurance and business insurance, as well as giving due consideration to superannuation for your retirement.
Let’s take a quick look at each of these financial considerations for sole traders.
If you are ill or injured and are unable to work, income protection can give you up to 75% of your income, so that you can pay your mortgage and bills, until you are able to work again. You can also take out a total and permanent disability insurance, in case you are unable to work again. As a sole trader with no employees to carry on the business if you become ill or unable to work, your income will stop immediately, which is why income protection is a vital part of planning for your future.
Personal accident insurance:
Depending on your situation, some sole traders prefer to take out personal accident insurance instead of a total and permanent disability cover. This type of insurance only covers accidents, not illnesses, but since it is cheaper than income protection, you might find it more suitable for your needs. It might also be more appropriate for people who are ineligible for income protection insurance, particularly since there are no medical questions or tests needed to apply for personal accident cover.
A sole trader doesn’t have the same protection as a company, so you are liable for all business debts and risk losing your personal assets if you can’t pay these debts. This is why it is important to consider taking out insurances to cover your financial obligations, if the operation of your business is interrupted by floods, fires, storms etc. You can also investigate professional indemnity to protect you from legal claims by customers, as well as public & product liability insurances.
Another very important consideration is your retirement, which is where superannuation becomes essential. As a sole trader you don’t have to pay into a superannuation fund, however when you retire you will have to rely on the government pension. It makes financial sense to organise your own superannuation, particularly since you can claim a tax deduction on your contributions.
If you are a sole trader and want to discuss securing your financial future, call us on 07 3356 6929 or complete our online enquiry form.