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2. Business - Structures



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  • 1. 1300 083 691 Business Structures
  • 2. 1300 083 691 Introduction Business Structures presentation attempts identifies elements involved in forming and naming your own business: • Legal and tax structures • Start up method • Naming your business • Registrations • Legal and finance advice
  • 3. 1300 083 691 LEGAL AND TAX STRUCTURES How you will trade - your first important decision The structure of your business CAN affect the tax you pay and your personal legal exposure. It is therefore extremely important to select the most appropriate legal structure. Structures relevant to small medium size business are: • Sole trader • Partnership • Trust • Private company
  • 4. 1300 083 691 Sole Trader Pro • Simple and inexpensive to set up and manage • You’re in complete control — and keep all the profits • Reduced paperwork • No need to register a business name – you can use your own Cons • Complete responsibility for business liabilities like debts or employee claims (Personal assets at risk) • Hard to take time off • Can be harder to get finance • More difficult changing ownership when selling the business Tax issues • Business profits are treated as personal income (Limited tax minimisation) Establishment • Trade in your own name, or register a business name in each state where you’ll trade (costs vary) • Register for an Australian Business Number (ABN) and GST if your turn over will be more than $70,000 a year Ongoing administration • Business Activity Statements • Personal Income Tax Returns
  • 5. 1300 083 691 Partnership Pros • Relatively easy and inexpensive to set up and manage • As all partners jointly own the business and its assets • Easier to get finance with the resources of several partners • Little ongoing paperwork Cons • Each partner is personally responsible for all liabilities, regardless of how much of the partnership each owns • Partners often disagree. You need to be confident you can work together, even when you don’t see eye to eye • Changes of ownership can be difficult, depending on the governing partnership agreement and financial resources Tax issues • A partnership does not pay tax, but still needs to have a TFN and lodge a return • Business profits are distributed among the partners, who pay income tax on them Establishment • Register your business name or trade under the partners’ names • Register for an ABN and GST if your turn over will be more than $70,000 a year and TFN • A partnership agreement needs to be drawn up that will govern your rights in line with the Partnership Act Ongoing administration • Business activity statements • Partnership income tax returns • Personal income tax returns
  • 6. 1300 083 691 Trust Pro • A trust is run by a trustee for the benefit of the trust’s beneficiaries. The trustee is responsible for any debts, meaning reduced personal liability (especially if the trustee is a company) • Flexibility in distributing profits to beneficiaries (especially with Family Trusts) • Easy to sell or pass on ownership Cons • Additional paperwork • Increased ongoing and set-up costs • Limited life (usually 99 years) Tax matters • Annual profits are distributed to the beneficiaries, who pay tax • Trusts generally do not pay tax (there are some exceptions) Setting up • Register your business name • Register for an ABN and GST if your turn over will be more than $70,000 a year and TFN • Establish a trust deed which sets out the beneficiaries and trust rules (You may also need a company if you are going to have a corporate trustee Ongoing administration • Business Activity Statements • Beneficiary income tax returns
  • 7. 1300 083 691 Company Pro • Reduced personal responsibility for business debts and other liabilities (although lawmakers are increasingly making company directors personally liable to a range of legal actions, while lenders will often ask individuals for a personal guarantee) • Flexibility in distributing profits to other shareholders • Easy to sell or pass on ownership Cons • Additional paperwork • Higher ongoing and set-up costs Tax matters • Profits are taxed at 30 per cent company tax flat rate • Profits can be reinvested in the company or paid out to shareholders as dividends. Dividends can come with ‘franking credits’ – credits for the tax already paid by the company, reducing shareholders’ tax • Reduced Capital Gains Discount which means you will pay more on any capital gains Setting up • Create a new company or buy a ‘shelf’ company • Register company with ASIC • Register for an Australian Company Number (ACN), GST, ABN and TFN Ongoing administration • Annual company reports • Business activity statements • Company tax returns
  • 8. 1300 083 691 Other Considerations How are you going to start your business? • Start up as a new business from scratch? • Buy an existing business? • Join with an established business? • Work full or part time? These decisions will have a direct impact on your set up costs, timeframe & the income you can expect to receive.
  • 9. 1300 083 691 Naming Your Business What’s in a name? • Naming your business needs careful consideration but keep it in perspective (DO NOT WASTE TOO MUCH TIME). • The most important question, is your business name available? • The name will define your business, so ensure it is relevant to your clients and it conveys the service you wish to provide. • Keep in mind succession planning a name linked to a person may be harder to sell at a later date. • The business name is significant for future branding & marketing.
  • 10. 1300 083 691 Who needs to know? When starting a business there are a number of people and agencies that will need to be informed: • ASIC if you are forming a company will issue you an Australian Company Number (ACN) • ATO will issue you an ABN and you may need to be registered for GST, PAYG (If you have employees) and FBT (If you have taxable fringe benefits) • Professional bodies and trade associations • Licensing Authorities (Certain businesses are required to be licensed eg Real Estate Agents and Financial Planners) • Your employer if you will still be working for someone else when you start your business then you may be legally required to inform them – check your employment contract.
  • 11. 1300 083 691 Professional Advice Getting the right legal & financial advice is an essential element in setting up a new business. Advice is required for many aspects of business, including: • Bookkeeping • Lease negotiations • Written agreements • Business Acquisition • Employment Agreements • Insurance • Banking
  • 12. 1300 083 691 If you have any queries please call us on 1300 083 691 or We can contact you request via our website press here View our Business Starter Package View our Compliance and Administration Package What Next?
  • 13. 1300 083 691 Lasseter InFocus Offices: T: 1300 083 691 Melbourne Altona E: Geelong W: