Many tradies start their self-employed life as a sole trader, but as their business grows, switching to a company is not uncommon.
It can make a lot of sense to go this way. When you go out on your own for the first time, you never know for sure if things are going to work out.
Why spend thousands on setting up a Pty Ltd company, when you can get up and running as a sole trader with an ABN for virtually nothing?
This is what we find is the case with many tradies who become Trade Risk clients for the first time.
But what happens when you switch to a Pty Ltd? Is your sole trader insurance now useless?
Thankfully not!
In most cases when you switch from a sole trader to a company, you’ll be able to change your existing Trade Risk policy with minimal fuss.
You will need to let us know of course, but the process is generally quite straightforward provided that the following criteria are met:
- The same person who was the sole trader is now the sole director of the new company
- The business activities have not changed
- There are no pending claims or circumstances that you need to notify us of
Even if you don’t meet the above criteria we should still be able to switch your policy, but it will be a little more complex depending on the situation.
The same applies if you are switching from a partnership to a company.
Provided that the same partners are now the directors of the new company, the change to your business insurance should be very straightforward and not require a whole new policy.
Is it more expensive to insure a company compared with a sole trader?
This is a common question, but the answer is generally no when it comes to public liability insurance.
Public liability is priced on a number of factors, such as the trade you are undertaking and the size of the business, either by revenue or staff numbers.
So if your business activities are staying the same and the size of your business isn’t changing, there should be no change to the cost of the insurance.
Keep in mind that there may be a small fee to make the change to the policy, but the actual insurance cost shouldn’t jump up.
Whilst on the subject though, it probably is a good time to review the information that we have about your business.
If your business is undertaking different activities, or has grown in terms of staff or revenue, this would be a great time to check that your insurance is up to scratch.
Again this doesn’t mean that you need a whole new policy, but may mean that your existing policy needs to be updated to meet your current needs.
Anything else to do?
If you’re paying your insurance monthly, you should switch your payment source to come out of the new bank account you’ve set up for your company.
Whilst it has no affect on your insurance, your accountant will appreciate it at tax time!
You’ll also need to ensure your licenses are now in your company name.
This is especially true for Qld electrical contractors, where there are very strict rules stating that the name on the licence must match the name on the insurance.
Next step
Call us on 1800 808 800 and our friendly team will help you out.
If you are looking for advice on anything that doesn’t involve your insurance, you’ll need to speak with your accountant.