If you want to turn your million-dollar idea into a company business one of the very first decisions you need to make is to choose the right structure for your future business. There are few options available in Australia, each of them attracts different legal and taxation consequences. The most suitable structure depends on your personal circumstances, the nature and the size of your business.
When I advise my clients, I put the best efforts to structure in a way that will give maximum tax planning opportunities and minimise the risk and liability for my clients. It’s worth investigating the right structure before starting a business. You can change the structure as your business grows or your circumstances change, however, that will involve additional expenses. Changing business structure may also attract capital gain tax (CGT).
Your business structure can determine your
- Tax liabilities
- Responsibilities as a business owner
- Potential personal liability
- Asset protection
- Ongoing costs and the volume of required paperwork
|Tip: It is always a good idea to discuss your proposed structure with your accountant or adviser.|
Main business structures commonly used in Australia
|Tip: For some clients a complex mix of entities is more preferable to take the maximum advantage of legitimate tax planning opportunities…|
Rating of business structures
Points to consider when setting up a business
- Written agreement: Before you start your business in association with another person or entity, I strongly recommend our clients to have a written agreement stipulating the financial contribution, roles and responsibilities of everyone involved in the business. Such agreement will not only guide you in running your business but also help in avoiding misunderstanding when the honeymoon period is over in your business.
- Contractor v employee: Whether you are an employee or a contractor depends on the specific circumstances of the working arrangement. Please check with your accountant or adviser or use ATO tools before setting up your business as a contractor.
- Personal Service Income (PSI): Before setting up a business you should work out if the income your business going to receive is PSI. Income is classified as PSI when more than 50% of the amount you received for a contract was for your labour, skills or expertise. You can receive PSI in almost any industry, trade or profession. However, some common examples include financial professionals, information technology consultants, engineers, construction workers and medical practitioners. If your business receives PSI that can have a significant adverse tax consequence. Please talk to your accountant or adviser if you are not certain about PSI.
This article contains comments of a general nature only and is provided as an information service only. The article also reflects the law as at the date it was written and may not take into account any recent or subsequent developments in the law. The article is not intended to be relied upon nor is it a substitute for specific professional advice. No responsibility can be accepted by Syed Akram Ullah, Syed Partners or the publisher for any loss occasioned to any person doing anything as a result of anything contained in the article. You should seek you own professional advice from your accountant/adviser before making any financial decisions.
For further information please contact:
Syed Akram Ullah
MCom CA CTA
Principal & CEO
Syed Partners – Chartered Accountants & Business Advisors
Telephone: 02 8712 6838
Mobile: 0430 800 455