What name should I run my business or hold my property investments in?
Lan Nguyen, Chartered Accountant
We need to go through a few things with you to select the best structure for your new business venture or investment purchase.
Taxation
Sole Trader – taxed on profits at individual’s marginal tax rate
Partnership – profits flow to partners, who are taxed at the relevant marginal rates
Company – taxed on profits at a flat rate of 30%
Discretionary Trust – profits are distributed to beneficiaries at the discretion of Trustee, beneficiaries are taxed at the relevant marginal rates
Unit Trust – profits are distributed to unit holders in accordance with unit holdings, who are taxed at the relevant marginal rates
Apart from income tax, other taxes & duties that need to be taken into consideration are:
- Capital Gains Tax (CGT)
- Payroll Tax
- Land Tax
- Stamp Duty
Protection
Generally speaking, Sole Traders and Family Partnerships have no asset protection or limitation of liability. In today’s litigious environment, this is not a sensible position to be in.
While no structure can guarantee complete protection, Company and Trust structures generally offer very good asset protection and limitation of liability.
Flexibility
One of the most underrated features needed in a business structure is flexibility.
In business, things change constantly. Governments change and so does legislation. Family circumstances change, business performance changes, even your priorities as a business owner change.
When we talk of flexibility within a business structure, we mean flexibility in the following areas:
- The ability to direct profits and/or losses where they will be most tax effective
- The ability to make changes to the equity arrangement without adverse tax implications
- The ability to restructure the operations of a business without adverse tax implications
These are the main points to bear in mind when choosing an appropriate business structure:
- Establishment costs can be minimal, when compared to potential tax savings
- Income Tax should not be the only consideration
- Flexibility is the main key to a good structure
- Asset Protection and Limitation of Liability is VERY important
- Sole Trader and Family Partnership structures are generally not recommended
Written by Lan Nguyen, Chartered Accountant and Wealth Adviser from Success Accounting Group.
About Lan Nguyen
Lan is the Founder and Chief Strategist at Success Accounting Group, Melbourne based CA firm. In a matter of short 8 years she has built up a reputable Chartered accounting firm with 3 offices and a team of 6 professional accountants and support team members. Her mission is to provide Innovative and Strategic Financial advice to help her customers make smarter financial decisions today for a brighter future.
Success Accounting Group is for established business owners who would like help to grow a sustained business. As a business owner you understand what drives your business success with our accounting team taking care of the rest.
Success and Wealth
Success Accounting Group Pty Ltd
Oakleigh, VIC, 3166
