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AGMBris
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BC, post: 101134 wrote:
Hi AGMBris,

Thanks for your excellent thoughts, and your accounting background lends a lot of weight to what you have to say!

I think I’m going to go with the Pty Ltd route, both for long term viability (I’ll get there eventually), ease of operations (operating nationwide and working with enterprise clients is easier as a company), and for trust (“Pty Ltd” on your businessname implies a lot).

In saying that, I did have a couple of questions around financial disadvantages:

  1. As a sole trader, you can claim a tax benefit up to $75,000. As a one-man company, would I not be able to claim this? (If not, can I get my company to contract myself as a sole trader?)
  2. As a sole trader, I don’t think I would need to make super contributions. But as an employee of my company, would I be obliged? (This is essentially 10% off cash flow so pretty important consideration I think)

Also, you mentioned needing to know about accounting if you go with the company. If I registered it today, would I need to see an accountant right away to set things up a certain way? Or can I follow common sense (seperate bank accounts, record every transaction) and sort things out at EOFY?

Thanks again for all your help!

Ben

Hi Ben

Sorry for the delay it has been a hectic new year.

It appears there has been quite a bit of response for you and all the information from the other poster’s is very valuable. There is a lot of information out there for you.

I always felt it was important to balance the “getting bogged down in the information” V “getting going” and thats probably really where i was coming from.

Your first query, I agree with previous postings, you can have the same claiming ability through company. And it is important to ensure you dont get into a PSI (personal service income) situation. The ATO ensures that we dont “hide” behind the company veil and push personal taxable through a company. To be honest it really doesnt serve you to do this either, even after the tax commissioners considerations/rules.

You would be obliged to pay super yes, and it is my oppinion, important to deal with the fact that the company is a separate legal entity and thus to distribute money to you as the employee has to be done correctly. ie you cant just see $1000 in the bank account and take it without PAYGW implications and super etc.

Secondly, unless you did the homework on how to administer the company, yes you probably should get an accountant on board to cover ASIC requirements and of course financial statements/tax return lodgements. Its too hard if you have some draw to learn about both really and certainly the tax packs nowadays are very informative.

Or even a consideration is to do a course in the fundamentals – its a real decision as to whether you want to tie your skills up in this or have some one do it to free you to focus on what you are good at. The reality in start up businesses is that you need to be the “jack” of all trades for a while. And if you have to load your working week up to secure the longevity of your business its not a bad thing. It does 2 things from my view.

1. it forces you to learn the ins and outs of your cashflow/financial situation and,
2. has you understanding the system that you are about to be governed by.

Having said that, I understand that cash flow is king and living within your means is very important.

So, dont get to caught up in the plethora of considerations. Perhaps if you can buy the company and domains (and possibly trademark) to secure your business name then thats great, and move into the corporate vehicle when you are ready. Thus, beginning the first year as a sole trader is not a bad solution to “get the empire started”.

Hope it helps,