Whether a new start up, established family business, or growing private business our team of experienced Accountants and Business advisers can work with you. They will protect and maximize your private business, and family financial affairs. We follow industry codes of practice. With financial picture in place, we can apply the right expertise, products and services to secure your financial position and keep you moving forward. We can determine your borrowing capacity and evaluate lender options including your current lender. So, we will support you to negotiate the loan structure with your selected lender and manage the process smoothly from initial discussion to settlement. You can gain new insights on your finances and have expert support when making financial decisions.
Setting up your own private business is exciting. But if you don’t have any preparation it can also be more challenging. In short, this guide will take you through each step of starting a business and help you understand what’s ahead.
1. Sole Trader (Trading Under ABN)
A sole trader is an individual running a business. It is the simplest and cheapest business structure. If you operate own private business as a sole trader. Then you are the only owner and you control and manage the business. You are legally responsible for all aspects of the business. Debts and losses can’t be shared with other individuals. You can employ workers in your business, but you can’t employ yourself. As a sole trader, you are responsible for paying your worker’s super. You’re also responsible for your own super and may choose to pay it into a fund for yourself to help save for your retirement. Apply ABN.
A partnership is a group or association of people who carry on a business and distribute income or losses between themselves. For example, if you and a friend or family member decide to set up a business together, you might operate it as a partnership. A partnership is relatively inexpensive to set up and operate. The partners share income, losses and control of the business. A written partnership agreement is not essential for a partnership to exist but is a good idea. A partnership agreement should outline how income or losses will be distributed to the partners and also know how the business will be controlled.
A partnership agreement can help prevent misunderstandings and disputes about what each partner brings to the partnership. And what they are entitled to receive from the income of the business. This is particularly important for tax purposes; if the profit or losses are not distributed equally among partners. Then the partners in a partnership are not employees, but the partnership might also employ other workers. Partners are responsible for their own superannuation arrangements. However, the partnership is required to pay superannuation for its employees.
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In a partnership business structure:
- partners shares the income, losses and control of the business.
- the partnership has its own TFN. And must lodge an annual partnership return showing all income and deductions of the business
- the partnership doesn’t pay income tax on the profit it earns. Each partner reports their share of the partnership income in their own tax return
- each partner pays taxes on their share of the partnership profit at the individual tax rate. However, may be eligible for the small business tax offset
- the partnership must apply for an ABN and use it for all business dealings
- the partnership must be registered for GST if its annual GST turnover is $75,000 or more.
As a partner you can’t claim deductions for money drawn from the business. Amounts you take from a partnership are not wages for tax purposes.
A company is a legal entity with higher set-up and administration costs; run by its directors and owned by its shareholders. Companies also have additional reporting requirements. While a company provides some asset protection, its directors can be legally liable for their actions. And in some cases, for the debts of the company. Companies are regulated by the Australian Securities & Investments Commission (ASIC).
In this business structure, the company:
- must apply for a tax file number (TFN). And use it when lodging its annual tax return
- is entitled to an Australian business number (ABN) if it is registered under the Corporations Act 2001. A company not registered under the Corporations law may register for an ABN; if it is carrying on an enterprise in Australia
- must be registered for GST; if its annual GST turnover is $75,000 or more
- owns the money that the business earns. The individuals who control the business cannot take money out of the business, except as a formal distribution of the profits or wages
- must lodge an annual company tax return
- usually pays its income tax by instalments through the pay as you go (PAYG) instalments system
- pays tax at the company tax rate or lower company tax rate (if a base rate entity)
- may be eligible for small business concessions
- must pay super guarantee contributions (SGC) for any eligible workers. This includes you, if you are a director of the company, and any other company directors.
Setting up a trust can be expensive as a formal deed is required outlining how the trust will operate. There are formal yearly administrative tasks for the trustee. A trustee is legally responsible for the operation of the trust. The trustee can be an individual or a company. Hence, profits from the trust goes to beneficiaries.
If you use a trust for your business structure, the trust:
- must have its own tax file number (TFN) for lodging its annual tax return
- should apply for an ABN and use it for all business dealings
- must registered for GST; if annual GST turnover is $75,000 or more
- may be liable to pay tax depending on the wording of its deed. And whether any income the trust earns is distributed to its beneficiaries
- may be able to access small business tax concessions
- must pay super for any of its employees (this may also include the trustee if they are also the employees of the trust).
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