When starting a new business there are several things to consider. The most important one is the structure in which to operate.
The most common four business structures in Australia to operate are
Sole Trader using an individual ABN- Partnership – 2 or more individuals joining together (perfect for mum and dad type partnership)
- Family or Unit Trust
- Company (Pty Ltd)
When deciding the structure of the business, it is important to consider each one’s personal circumstances, the legal exposure their new venture may have and the risks it may have on their personal assets. The right structure is chosen after giving due consideration to all of these. The second most important thing to consider while choosing the structure is the income tax effect it may have. Tax rates are different for each structure and so is the taxing point and timing.
We are experts in this field. Call us now to book a free initial consultation (03 8905 4936)
Common Myth – Business Structure
A common myth about the choice of structure is that shifting from operating as a sole trader to a company reduces the tax liability. The company tax rate is a flat 25% which is lot lower than the maximum rate applicable for individual income which is currently at 45%. However, when the company profit is distributed as a dividend to the individual shareholder, this will be included in their individual tax return and taxed accordingly, with a credit for tax paid by company already.
Operating the business under a family trust presents tax saving opportunities, however this depends on the composition of the individual family unit and their respective earnings.
Does “One Size Fits All” – Answer is NO
It is strongly recommended that advice from an Accountant is sought when embarking on a new business venture. An accountant will ask the right question and suggest the right structure best suited to the individual.
Experts in New Business Consulting
At Whitehorse accountants, we are experts in providing advice and have helped numerous businesses in setting up with the right structure. From opening the new structure, registering a business name, complying with ATO requirements, setting up the payroll and superannuation, we cover it all and get the client off to a good start. Contact us to know more about our new business consulting services.