- This topic is empty.
April 1, 2014 at 11:00 pm #987359Mark82Member
- Total posts: 1
I am currently operating as a small Landscaping business & have been advised by others i should be looking trade as a company,
I need some help,
1 What are the pros & cons in changing to a company?
2 How will the Tax work out?
3 Anything i should be looking for or doing differently to help with the change over?
Thanks in advanceApril 2, 2014 at 1:46 am #1162342Qinnie(OzFairTrade)Member
- Total posts: 47
I recently incorporated my business and did a lot of research before that. The main reason I incorporated was because I needed to be recognised as a Charity and Fair Trader. Otherwise I wouldn’t have, because the business was still trading at a loss and thus didn’t make financial sense to incorporate.
In summary, here are some main points you need to consider:
April 2, 2014 at 6:54 am #1162343Dave Gillen – Former FS ConciergeKeymaster
- If your business is trading at a loss, then sole trader structure allows you to offset that loss against your other income. Once it’s incorporated, it’s a separate entity and you can not claim against your other income. The net income of the business will be taxed at 30% corporate rate.
- The cost of setting up a company (I set mine up online and it costed roughtly $500)
- The cost of separate ongoing accounting and reporting for the company
- Risk of being sued. If you are a sole trader and there’s a considerable risk of being sued, then you’d want to be incorporated otherwise all your personal assets will be at risk
- A company could be perceived as more “credible” although this is less of an issue I reckon in your case. There will also be cost of rebranding if you need more business cards etc.
April 2, 2014 at 7:30 am #1162344MissSassyMember
- Total posts: 2,566
- Total posts: 1,255
While it seems a simple question – it is really one for your accountant to advise on as they can take into account all of your personal and business circumstances.
There are lots of reasons and lots of benefits – mostly though if you are turning over more than $100k you are in the range of benefiting from this structure.
As I said though it is not always a simple answer that can apply to everyone.April 2, 2014 at 8:31 am #1162345affgarMember
- Total posts: 123
Just out of curiosity …. are you registered for GST?
Being a sole trader & not registered for GST is the happiest place you can ever be lol
Work loads, burden & accounting all increase with both GST & CO.
Yes being a company can protect your personal assets.
But is anything ever going to happen to put your assets at risk outside of what Public Liability Insurance wont cover?
Serious questions to ask.
Are you going to increase your workload substantially by moving to incorp… & does your income warrant the shift?April 3, 2014 at 5:27 am #1162346alliedibMember
::affgar, post: 187650 wrote:But is anything ever going to happen to put your assets at risk outside of what Public Liability Insurance wont cover?
- Total posts: 453
Slightly OT, but there are plenty of instances where things can happen and your Public Liability insurance won’t cover you. Consider the following:
– A worker injures themselves. Workcover pay the compensation, but then take action against you for failing to provide a safe workplace. The fine is $X and the legal costs also are substantial.
– You happen to remove a tree which is on the endangered list. Council fine you $X.
– You dump green waste in a reserve, believing that it was acceptable due to others also doing the same and you being told that it could be done. Council fine you $X.
– You have 2 workers, one of whom believes that they are being bullied by the other. They tell you but you don’t want to get involved. The employee claims damages from you based on that you should have arrested the situation.
– Your business starts advertising and, although unintentional, it infringes on the copyrighted material owned by another landscaping firm. They claim damages from you, based on the fact their clients have swapped to use your services because of your advertising.
In all of these scenarios, Public Liability would not cover you. You can obtain protection cover against these scenarios (one way is through insurance – Statutory Liability / Employment Practices Liability / Errors and Omissions or Professional Indemnity). I am not trying to be all doom and gloom, just pointing out what a lot of people don’t understand because it does happen (the first scenario happened recently – the plumber declined to take out a $1,200 Management Liability policy which included cover for Statutory Liability cover for his 15 employees. Worksafe in the relevant state took the action after the employee almost cut his hand off handling metal without gloves. The fine was in the vicinity of $60,000).
Generally speaking, becoming a company gives you another level of protection, although it does not completely absolve you of your personal responsibilities. You also have new responsibilities (ie you may now be considered a working director – therefore you may need Workers Compensation to cover you) and can be held personally accountable for your actions.
My advice – talk to your accountant, then talk to your insurance advisor about your entity structure. They both should be able to help you and discuss what the implications are of each.
Let me know if you have any questions or need me to clarify anything.
- You must be logged in to reply to this topic.