How to choose the best type of business structure for you

There comes a motivation to start a business but a person with no background of business may fall under the wrong business structure. So if you’re one of them this article will help you make your decision. 

In Australia, there are four common business structures  and as time passes with necessity you can change the structure of your business.

Let’s have a look at the options below.

Sole Trader

The word sole trader means that the business is registered under one single person’s name. All you to go on ato business portal to register your business. It’s suitable for home based businesses, service based businesses and contractors.

As a Sole trader, you need to pay tax at the individual tax rate. Also you’ll need to lodge an individual tax return in the same way you would as an employee.

Legal Structure of business in partnership

A partnership is an association of two or more people who undertake business as partners. Commonly used for professional service businesses, this business structure is also relatively inexpensive to set up.

In partnership structure, you should consider your type of personality and your partner’s first so that vision should not be diverted. Also in case of debts, insurances etc. everything needs an extensive deliberation. 

Problems also comes in partnership when one of the person gets bored due to any how reason and wants to know the worth of business for sale. In this way the dedication to grow the business diverts and many times businesses fails.

Company 

A company can be complex and simple too depending upon the size of the business. This structure is best for you if you want to grow a brand into a whole corporation. 

You’ll have to pay the tax (30% approximately) for every single dollar you earn. A personal business accountant can help you work out in case of complex finances.

Business organizational structure of Trusts

You might have seen some businesses whose assets are managed by a single person known as a trustee. That type of structure is called trust. 

After the revenue is generated, income is distributed among the family members of the owners according to the law of share and taxed at the top marginal tax rate (currently 45%). 

In trusts, profit can not be used for business growth because it has to be distributed. Therefore, getting professional advice for a trust is necessary.

Business tax concessions 

Some of the concessions in tax are;

• income tax concessions
• goods and services tax (GST) 
• excise 
• pay as you go (PAYG) instalments 
• fringe benefits tax (FBT) 

Getting an advice from the experts will help you determine about the eligibility criteria 

Payroll tax: On what terms? 

Payroll tax will be charged in case you employ the people. Rules are different from state to state in Australia. 

Before taking the decision of what business structure suits best for you

Keep these questions in mind before making the final decision.

• By taking advice from the industry experts and other business fellows think ten times that is the structure reliable for your business type, size and growth?
• In future what are the risks and benefits?
• Will your assets be protected?
• Are you even eligible to meet the requirements?

How to change your business structure in Australia?

There are circumstances that lead to change the structure of an entire business due to many reasons. 

Whether it be expanding the branches or saving the tax, We will tell you things to consider while doing so!

1. Firstly, contact your tax accountant / tax adviser as tax issues are nearly inevitable when it comes to this transition.  
2. ABN is used during times of emergency or natural disaster by the government to identify whose business is this. That’s why we will recommend you to include the physical location, phone number and other authorized contacts and emails while registration. 
3. If you are changing your business structure, for example from a sole trader to a company/partnership or vice versa, you will need a new ABN.  Also ABN details and GST registration must be updated on your tax invoices.

Even though there are few things which will bother you then no need to worry because at SagaCityTax our professional experienced business accountants will give the right advice for your business future.