Business Structure North Lakes

Selecting the right Business Structure

Choosing the right path can be difficult; however, you are not bound by one and can always change your business structure as it expands and grows. Each of these business structures may have an impact on your costs, assets, and tax liability. Let us quickly go over what each of these business structures means.

Sole Trader

As a sole trader, you are legally responsible for everything related to your business. A sole trader usually makes all of the business decisions and can hire others to help them run their business.

Tax liability: As an individual, you must pay tax on any income earned from a sole proprietorship.

If your annual revenue exceeds $75,000, you must also pay GST and file a business activity statement.

Partnership

Similar to a sole proprietor, the owner is personally liable for all aspects of the business; however, in a partnership, two or more people may take joint ownership and split the profits and losses.

Individuals can also pool their assets and skills in a partnership business structure to increase their chances of success. A partnership can also hire employees to assist them in running the business.

Tax liability: Partners pay tax as individuals on business income divided among partners. If your annual revenue exceeds $75,000, you must also pay GST and file a business activity statement.

Company

A company differs from the previous examples of business structure in that when you establish one, you create a legal entity that is distinct from you. This means that the company can own assets and enter into contracts with third parties directly.

Tax liability: Companies are subject to corporate tax rates that differ from individual tax rates. Depending on the criteria you meet, the current company tax rate is either 27.5% or 30%. If your annual revenue exceeds $75,000, you must also pay GST.

Trust

A trust is a legal entity in which certain trustees conduct business on behalf of the trust members. Beneficiaries are another term for trust members. This type of structure can be difficult to set up and costly.

The trustee is responsible for any debts and liabilities and can be either an individual or a corporation. Trusts are frequently used to manage, protect, and transfer family assets such as stock, personal property, and the family business from one generation to the next.

Tax liability: The trustee distributes the business profits to the beneficiaries, who then pay income tax at their marginal individual tax rates on the income received.

Hiring the right advisor for selecting a business structure in North Lakes.

Choosing the right business structure is a crucial decision that can greatly impact the success and longevity of your business. It’s important to have a qualified advisor who can guide you through the process and help you make the best decision for your unique situation. Take a look at the following helpful tips on how to choose the right business structure advisor in North Lakes to ensure your business’s success.

Tax implications of your business structure in North Lakes.

Choosing the right business structure is a crucial decision for any business owner. One important factor to consider is the tax implications of each structure. In Australia, there are several business structures to choose from, including sole trader, partnership, company, and trust.

The tax implications of each structure can vary significantly. For example, a sole trader is personally liable for all business debts and may pay income tax at a higher rate than a company. On the other hand, a company may have access to more tax deductions and a lower tax rate, but may be subject to additional taxes such as dividend imputation.

Find the right business structure to meet your specific needs.

Another factor to consider is payroll taxes. If you have employees, you will need to withhold and remit payroll taxes, which can be a complex process. The business structure you choose can impact your payroll tax obligations, so it’s important to seek professional advice.

Sales taxes, such as Goods and Services Tax (GST), are also a consideration. Depending on your business structure, you may need to register for GST and charge GST on your products or services.

Choosing the right business structure can also help you minimise your taxes. For example, a trust structure may provide greater flexibility in distributing income and reducing tax liability. A professional accountant can provide advice on the best business structure for your unique circumstances and help you minimise your tax obligations.

Understanding liability for different business structures in North Lakes.

In Australia, the choice of business structure is an important decision that can have significant legal and financial implications for business owners. The most common business structures include sole trader, partnership, company, and trust. Each structure has its advantages and disadvantages, and it is essential to understand the legal and liability implications of each option before making a decision.

For example, a sole trader is a simple and cost-effective structure but exposes the business owner to unlimited personal liability for business debts and legal actions. A partnership also has unlimited liability, but it is shared among the partners.

Sole Trader and Partnership liability laws

While a sole trader and partnership structures have unlimited liability, it’s important to note that there are differences between the two. In a partnership, each partner is only liable for their share of the partnership’s debts and obligations, while in a sole trader structure, the business owner is solely responsible for all debts and obligations. This means that if the business cannot pay its debts, the sole trader’s personal assets can be seized to pay off the debt, potentially resulting in bankruptcy.

In contrast, partnerships may have more resources to draw upon to pay off debts, as they can pool their assets and resources. However, partnerships also come with the added complexity of having to navigate shared decision-making and profit-sharing.

Company and Trust liability laws

A company, on the other hand, is a separate legal entity, which means that the company is responsible for its debts and legal actions, rather than the owners. This structure provides limited liability protection for shareholders, but it also comes with more legal and regulatory requirements.

Trusts are a more complex structure, but they can provide unique tax advantages and asset protection for beneficiaries. However, they also require careful planning and management to ensure compliance with legal and tax obligations.

Choosing the right business structure requires careful consideration of the specific needs and goals of the business owner. Seeking advice from a professional accountant or business advisor with expertise in business structure and liability, such as Total Business Partners, can help ensure that the chosen structure provides the optimal balance of protection and flexibility for the business.