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Ballarat Accountants: What is the best business structure for your business?

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

When starting a business, you would need to choose a business structure. It will depend on the type and size of the business and how you want to run it. Business structures have an impact on key business areas such as asset protection, tax and costs. The four most common type of business structures in Australia are the sole trader, company, partnership and trust.

You should choose carefully which business structure you will use to suit your business needs. You need to consider key factors and rules such as the licenses you require, how much tax you pay, if you are an owner or employee of the business, any potential personal liabilities, control over the business and ongoing paperwork and costs for the business. While you can change the business structure as your business grows, it’s better to choose the right one from the start.

Sole Trader Business Structure

A sole trader is the easiest and most inexpensive business structure to set up. Sole traders are legally responsible for all business aspects such as debts, losses and daily business decisions. If you are looking to be a sole trader, it will give you full control of your business and assets and require you fewer reports. It is low cost and allows you to use your individual tax file number to lodge tax returns. You won’t need a separate business bank account but it is recommended for easier tracking of income and expenses.

The sole trader business structure requires you to keep financial records for a minimum of five years. It has unlimited liability and your personal assets are at risk in case things go wrong. It does not allow for splitting of business profits or losses with family members and makes you personally liable for income tax. You can employ people under the sole trader business structure but take note of your obligations like superannuation contributions and workers’ compensation insurance.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

Partnership

partnership consists of two or more people who distribute income or losses amongst themselves. The three types or partnerships are General Partnership where all partners are equally responsible for the business management, obligations and debts, Limited Partnership where the liability of partners is limited to the amount of money they have contributed to the partnership and Incorporated Limited Partnership where partners can have limited liability for the debts of the business provided there is at least one with unlimited liability.

Partnerships are easy and inexpensive to set up with minimal reporting requirements. It requires separate tax file numbers and must have an Australian business number (ABN) for all its business dealings. Partners share control and management and pay tax on the share of the net partnership income each partner receives. It requires a tax return and GST registration if turnover is more than $75,000. Partnerships require partners to be responsible for their own super arrangements.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

Company Business Structure

company business structure is a separate legal entity which has the same rights as an individual and can incur debt, sue and be sued. Members are not liable for the company’s debts but are obliged to pay the company any amount unpaid on their shares if called to do so. Company directors may be personally liable in case of beach of legal obligations. It can be complicated and expensive to set up so it is for those who expect highly variable business income and want to use losses to offset future profits. All obligations are under the Corporations Act 2001.

Trust Business Structure

Directors and shareholders control business operations and income belongs to the company. Income tax and annual review (with accompanying running costs) are required. It offers wider access to capital but directors need to declare solvency each year. Companies with over $75,000 of turnover must register for goods and services tax as well. Key changes to company details must be reported to ASIC and financial records must be properly kept.

trust is an obligation imposed on a trustee who holds property or assets for trust beneficiaries. Trust structures can be expensive to set up and operate. It requires a formal trust deed that outlines how it operates and requires the trustee to do formal yearly admin tasks. He or she is legally responsible for the trust’s operations. A trustee can also be a company to provide asset protection.

Ballarat Accountants

As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.

You can click here to speak to a businessaccounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.

We would love to help you formulate investment strategies and streamline your processes to take your business to the next level.  Our goal is to help you grow your business, find ways to invest more and increase your productivity.

PS. Here are two other ways we help business owners grow their business:

1. Take our free online assessment and see how much your business is currently worth (free 30page detailed report included)

2. If you are looking to change Accountants or need advice on how to grow your business, organise a 1on1 session with a Sky Business Expert here

 

Email Address: info@skyacc.com.au

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