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  • #991321
    Stewraz
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    People of flying Solo. I have just stumbled across this amazing site, it’s so nice to know there is an active community of like minded people.

    I have a question. I am setting up a small online retail presence for my wife who is starting to go stir crazy looking after our lovely baby girl every day. I have just registered a domain and applied for an ABN. When I got the ABN I set it as a partnership without thinking too much. the partnership is her and I. I then went and registered a business name to trade by. It’s exactly the same as my domain name and I’m happy about that.

    The question is. Should I have set the ABN as a sole trader to start with?

    Having it as a partnership now means that I effectivly share in the profit or loss and this may bring about tax implications for me. Now I can work with the tax side though only if I know I didn’t have another option. She may not make that much from this venture in the first year and dosnt have another form of income. So the tax free threshold may be handy. She can’t claim this as a partnership can she ? Can I stipulate that legally she has 80% of the profit and me the other 20 for tax reasons. ?

    Also, as a partnership requires its own TFN, does it make it easier to get public liability insurance? We will be selling baby clothing mostly though this may also go into accessories so liability is important to me.

    I guess I’m looking to know if a partnership was the right thing to do. And if not, is it easy to update the ABN to make it a sole trader and also update the business name to reflect this ?

    Sorry if I’m talking jibberish, it’s fun learning but I have long way to go. cheers in advance. Stew

    #1180933
    Robert Gerrish
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    Hi Stew

    Thanks for joining the community and for diving straight in! While I’m sure some of our super generous members will give you up-to-the-minute responses, you may find these articles worthwhile reading in the interim:

    1. Choosing the right business structure

    2. Operating as a company

    It’s good to have you aboard,

    Robert and the FS Crew

    #1180934
    Stewraz
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    Thanks Rob,

    Those links are a good place to start, much appreciated. Not sure if there are any TAX experts here, I would love to know if there are a few benefits to the partnership approach. Having its own TFN and paying a flat rate of 30% company tax is all good and well, though are there other perks to being able to write more off and declare more against the company TFN?

    #1180935
    NickKaro
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    Hi Stew

    If limited liability is important to you, the sole trader/partnership structures will not provide the protection that a company will.

    From a tax perspective, I am considered one of the “tax experts” around here – feel free to give me a call and I would be happy to provide some guidance and determine the most appropriate structure to undertake the venture (my contact details are in my signature below).

    Regards
    Nick

    #1180936
    Will @ ABB
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    Stewraz, post: 211088 wrote:
    Thanks Rob,

    Those links are a good place to start, much appreciated. Not sure if there are any TAX experts here, I would love to know if there are a few benefits to the partnership approach. Having its own TFN and paying a flat rate of 30% company tax is all good and well, though are there other perks to being able to write more off and declare more against the company TFN?

    Hi Stew,

    Might just have to clarify a couple of points there – ‘partnerships’ as a business structure aren’t entitled to a flat tax rate of 30%, that’s only for businesses setup in a ‘company’ structure. In terms of benefits of a partnership over sole trader – their really isn’t any. In fact, there are more benefits to setting it up as a sole trader business for your wife, if you don’t plan to actually take any portion of the profits as your own income. All income from partnerships is still reported on as personal income, despite having a partnership TFN.

    Having said all of that, there’s probably 3 set options you’ve got:

    1: Leave it as it is – definitely not the preferred option, because if you’re set up as 50/50 partners then 50% of any income earned will be reportable on your individual tax return.

    2: Cancel the ABN and setup as a sole trader – probably the easiest option in terms of paperwork and minimal cost, you don’t have to worry about your own personal reportable tax, and your wife’s tax is fairly easily calculable, not to mention the benefit of the tax-free threshold.

    3. Cancel the ABN and setup as a company – a bit of mucking around with paperwork (annually as well as initially setting it up), and a bit more cost involved. However, the reason I mention it is it means limited liability, plus the flat tax rate mentioned above.

    If you’re still unsure, I’d suggest setting up a meeting with an accountant to further clarify the tax implications. There is plenty of information available both on this forum and on government websites like the Australian Business Register – but it can be a bit overwhelming/confusing if you’re not a tax professional.

    Hope that helps!

    #1180937
    Stewraz
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    This is amazing advice.

    I also spoke to the ABR and they informed me that any change to the structure requires me to cancel the ABN and re-apply. This is fine and simple to do.

    then called ASIC and they advised me that a transfer of ownership (while it says 24 days on the site) is most often done in 24-48 hours. It will require me to pay a registration fee (nominal amount < $100). So the only thing remaining is to decide between Sole Trader or Company. I will be selling baby products, so i have a gut feeling that i should not limit my ability to get a great public liability cover. Company seems the best way to go in this regard. I also got advised to use Easycompanies.com.au as they charge $400 to simplify the process of registering the company name, getting the ABN and also the ACN. Getting there guys, really appreciate the advice so far :)

    #1180938
    krug
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    • Total posts: 16
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    EasyCompanies charges $497 for a Company registration. If you want to save $40, you can download a form from ASIC website, fill it in and send; obviously takes longer than doing it online. EasyCompanies charges $49 for ABN registration, which you can do yourself for free on ABR website.

    Setting a one person company (owner/director) is simple, but it requires reporting to ASIC, I think annually, but it may be quarterly, and you need to pay for it (I think it’s about $250). Anything more complex than one person (owner/director) company requires constitution, and this you can get from a layer or tax agent for about $500-600.

    Limited liability of a company is often over-emphasised, especially for small businesses. When other businesses want to deal with you, if you are not big and they don’t have confidence in you (your company), they will ask for a personal assurance, in which case the company’s limited liability means nothing.

    Public liability (insurance) is a different thing from a limited liability of a company, and it applies to any business structure. In your case, I’m not sure what public liability insurance would cover since the manufacturer of the products that you sell is responsible for the products (not you) and the manufacturer should have public liability insurance.

    I’m not clear if you are setting up a business only for your wife, or for both your wife and yourself, and how much money you are making now and how much in a year, 2 years, etc. Also the tax free threshold shouldn’t be important; you should be making more money than that; otherwise why are you running a business?

    Partnership is generally not recommended, but as long as you are in a harmonious relationship with your wife, this should not be a problem. And yes, you can split 20/80, 50/50 or whatever you like.

    Regardless of the business structure, I would recommend you concentrate on making $$, more than tax free threshold, and change the business structure later if you have a good reason for it.

    Note: I’m not a lawyer or tax agent, so I can’t guaranty that the information above is 100% correct.

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