Choosing your business structure is an important decision because this will determine the foundation for asset protection, the amount of tax you are liable to pay, the costs of running a business, and your ability to maximise profits. However, to decide which business structure is the best for your business can be confusing as there are advantages and disadvantages to consider for each type.
Abbotts is able to explain and ‘walk you through’ this process to find which structure is most suitable to your circumstances. Once you have decided upon the business structure, we can then assist the establishment of the business structure, and ensure you understand and comply with all of your businesses legal obligations.
A sole trader is an individual running a business. It is the simplest and cheapest business structure. By operating a business as a sole trader, you are the only owner and control and manage the business, including being legally responsible for anything the business does or does not do.
A company is a separate legal entity and a distinct taxpayer in its own right. It has a variety of unique taxation and legal characteristics that suit certain business circumstances, yet those same characteristics can be highly inefficient for other scenarios. The set-up and administration costs of a company are also higher than other business structures, with there also being additional reporting requirements.
If you have a company structure and the income the company receives is mostly for your personal efforts, skills or expertise, you need to work out if the personal services income (PSI) rules apply. If the PSI rules apply, the income will be treated as your individual income for tax purposes. This will also affect the deductions you can claim.
Trusts are complex legal structures that are highly efficient for tax management, asset protection and wealth management. A trustee is legally responsible for the operation of the trust. The trustee can be an individual or a company. Profits from the trust go to beneficiaries, however payment of taxes will fall with either the trust or the individual beneficiaries depending on how the trust income is distributed.
When used in the right circumstances these structures can achieve results that are unable to be mimicked by any other, but are often underutilised and misunderstood by financial advisors. Abbotts can provide comprehensive advice on the strategic planning and compliance issues relating to fixed and discretionary trusts.
Partnership structures are very common structures in small business and are relatively inexpensive to set up and operate. A partnership is a group or association of people who carry on a business and distribute income or losses between themselves. For example, if you and a friend or family member decide to set up a business together, you might operate it as a partnership.
They are simple and flexible structures but may not be suitable where the partners or the business are exposed to high levels of commercial risk, as all partners within the partnership hold joint and several liability to those risks.
Abbotts can provide comprehensive strategic planning and compliance management for partnership structures to comply with tax laws; utilising hybrid structures that keep the desirable features in a partnership, but also minimise some of the issues being in that business structure can bring.
A joint venture (‘JV’) is an arrangement commonly adopted by businesses in the mining, primary production and other industries. A joint venture is not an entity by itself – each participant accounting for their own dealings. A JV can however consolidate certain tax requirements such as GST under a nominated JV operator, with the nominated entity maintaining the affairs of all participants for the purpose the JV was created for.
We can provide advice on matters pertaining to the use of a joint venture, and the taxation and administrative implications choosing this form of agreement can bring its participants.
It may not be initially evident that your will and estate planning decisions actually form part of your business structure strategies. Well-structured wills can result in highly efficient investment structures being created to look after your family after the passing of a family member.
Estate planning may well be one of the most important things you can do for the financial security of your loved ones. It is not a matter to be left to chance and should involve input from trusted professionals who specialise in this field. With over 30 years of experience in estate planning, Abbotts can assist you to establish, interpret and understand the legal and tax implications of your estate planning process. We can also introduce you to legal advisors who we have long and trusted professional relationships with that can ensure the documents prepared will withstand the test of time and the rigors of estate management.
Estate planning is not just about getting your will in order, it is about preparing your families wealth for effective transfer in accordance with your wishes and in a manner that minimises taxation and other costs to your survivors.
Superannuation is a tax effective way to save for your retirement. Your money is pooled with other members’ money and invested on your behalf. Generally you will not be able to access this money until you retire. Your employer will make contributions to your super fund and you can top it up with your own money.
We provide comprehensive taxation and financial advice related to superannuation for both individuals and business.
Chris has been a part of the Abbotts Team since 1987 and has worked in the accounting profession since 1983. He qualified as a Chartered Accountant in 1991 and was appointed as a Partner in Abbotts Chartered Accountants that year.
Eric has in excess of 15 years of experience providing tax and business services having worked in both mid-tier and boutique advisory firms.