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Business Structuring Services in Williams Landing, Melbourne
Starting a business is more than obtaining Australian Business Number (ABN) and opening a bank account. Saving money on setting up a new business structure doesn’t mean it’s the best and most optimised structure from a taxation perspective.
Setting up the right business structure right from the onset can save you an enormous amount of money in taxation during the lifetime of your business.
When you first start a business, you’ll need to decide on business structuring. Your business structure identifies how you operate as a trading business. It’ll affect things like:
- Business control
- tax advantages and disadvantages
- Sharing of profits and losses
- Legal costs and obligations.
You can change your business structure as your business grows or circumstances change.
Some of the popular business structuring are –
What is a Sole Trader?
A sole trader is a self-employed person who owns and runs their business as an individual. The individual is legally responsible for all aspects of the business including debts and losses. You can still hire people under this business structure.
It is very common for tradespeople operate their businesses as a sole trader.
Features of Sole Trader
- You can use your individual tax file number (TFN) when lodging your income tax return.
- Australian Business Number (ABN) is required to operate business.
- Goods and services tax (GST) – You need to register for Goods and services tax (GST) if your expected or current annual turnover is $75,000 or more.
- As a sole trader, you’re responsible for your own superannuation arrangements.
- A sole trader owns all the business assets and is responsible for the business’s liabilities. Liability is unlimited and includes all personal assets, including any assets the owner shares with another person (such as a jointly owned home or money in a joint bank account).
What is a Partnership?
A partnership is formed when between 2 and 20 people go into business together.
Features of Partnership
- Partners are equally responsible for the management of the business.
- Partners have unlimited liability for the debts and obligations it may incur.
- A partnership has its own tax file number (TFN) and often an Australian business number (ABN). It will use these to lodge its own tax return.
- Profits are divided between the partners as set out in the partnership agreement. Each partner then adds their share of the profit (or loss) to their personal income tax for assessment by the ATO.
- Goods and services tax (GST) – Goods and services tax (GST) registration required if expected or current annual turnover is $75,000 or more.
- As a member of a partnership partners are not employees, partners are responsible for paying their own super.
What is a Company?
A company has members (shareholders) who own the company and directors who run it.
Features of a Company
- Directors are solely responsible for all aspect of the business including debts, losses and day-to-day business decisions.
- A company is a separate legal entity. This means a company can own assets sue someone and be sued.
- A company has same rights as a natural person.
- Liability of shareholders (owners) is removed as a company owner.
- Company is more expensive to register compared to Sole Trader and Partnership Structures.
- Annual Renewal fee payable to ASIC to keep the company registered.
- Companies have limited liability but directors can be personally liable under the Act if they’re found to be fraudulent, negligent or reckless.
- A company lodges its own tax return and has its own business tax file number (TFN).
- Goods and services tax (GST) – Goods and services tax (GST) registration required if expected or current annual turnover is $75,000 or more.
- A company is subject to tax in its own right.
Expert Tax has extensive experience in business structuring, we provide expert advice on business structuring and setting up of various structures.
