Home Forums Starting your journey Sole Trader – two businesses – selling business

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  • #991500
    MickB
    Member
    • Total posts: 19

    Hi guys,

    Someone gave me the business advice early that: “you should know how to exit something before you get in to something as it will be less headaches at the end”

    Now.. my questions. I saw this thread on here http://www.flyingsolo.com.au/forums/starting-business/1631-two-small-businesses-do-i-need-two-abns-2.html#post198212

    I am similar. Sole trader. One ABN, but I understand I can have a million different avenues of business and use one ABN and if I desire to use a name rather than my own personal name I need to have a trading name too, ie. Barry Jones Trading as Little Kids Clothing Co. I understand that on my invoices I must use my name, trading as, then my ABN.

    No probs. However, come to a sticky point.

    I run a graphic design business as well as a small online store. The online store started as a hobby and my accountant advised that it was under the threshold of turnover in the first couple of years to be assessed. Now its over the turnover Im worried about tax implications etc.

    However my worry is if this business grows – how is it possible to sell?

    I keep the records separate from each other – the incomings (revenue) and the outgoings (expenses). I use Excel to track all the design invoices, all my expenses – print, software, subscriptions, deductible expenses – tea, coffee, stationary etc. Then I use excel to track the online store, purchase of wholesale goods, income from selling online, deductions – domain names, site costs etc.

    But at the end of the day the businesses are one and the same as far as the ATO see it as they share an ABN. They just sell under different trading names.

    I keep the books separate as it means I know if either business is profitable, however my accountant hates it as its twice the work, and really i don’t think it matters as the ABN is myself, one entity as a sole trader.

    If I went to sell the online store as a business moving forward, wouldn’t the figures for that “business” be part of the wider ABN – so design + online store?

    Just wondering if I should get my bum in gear and register each one as a company… more fees but separates both businesses as their own entities. Any one care to offer advice? I can’t be the only person in this situation.

    #1181811
    NickKaro
    Member
    • Total posts: 226

    As a sole trader, you can only sell each business by selling the assets/IP/customer lists/etc. If you sell everything needed to continue to operate the business it will still be a sale of a going-concern.

    As a company you have the choice to sell the business + assets or the company, which can sometimes make it easier to find a purchaser or obtain a higher price.

    The difficulty with selling assets is that any contracts (leases, supplier agreements, etc.) will likely need consent to transfer to a different party, this mess is avoided where you are selling a Company.

    There is a lot to this so the above is obviously just a quick summary – feel free to get in touch if you would like some further assistance.

    Regards
    Nick

    #1181812
    ThexArm
    Member
    • Total posts: 253
    MickB, post: 212077 wrote:
    If I went to sell the online store as a business moving forward, wouldn’t the figures for that “business” be part of the wider ABN – so design + online store?

    Just wondering if I should get my bum in gear and register each one as a company… more fees but separates both businesses as their own entities. Any one care to offer advice? I can’t be the only person in this situation.

    Since you have personal accountant, what is his suggestion?

    For tax purposes, both businesses are treated as one as you rightly said both are under one ABN. The ABN is attached to you so even if you sell your either businesses the ABN is not going to be transferred to the new owner.

    If you are maintaining 2 sets of management books (which you seem to have) then there is no trouble is selling a business. You don’t normally disclose tax returns of a business to prospective buyers. You disclose management P&L of the business.

    Your accountant is right it is a hassle to keep books when you have 2 businesses under 1 ABN. It is not only double the work but also leads to confusion. You may be better off to get a accounting system in place instead of excel sheets. How do you track GST? Have you reached the turnover limit where you need to submit BAS? You can have 2 data files (1 for each business) in an accounting system (Xero or Myob) such that you can track your numbers better and be able to produce P&L for individual business.

    Yes, creating a pty ltd company is another option. You may not need to create 2 companies as you can continue to provide design services as a sole trader. By having a separate pty ltd company you may get extra time to reach your turnover limit as 2 businesses will be treated separately.

    #1181813
    MickB
    Member
    • Total posts: 19
    ThexArm, post: 212080 wrote:
    You may be better off to get a accounting system in place instead of excel sheets. How do you track GST? Have you reached the turnover limit where you need to submit BAS? You can have 2 data files (1 for each business) in an accounting system (Xero or Myob) such that you can track your numbers better and be able to produce P&L for individual business.

    I need to speak to my accountant regarding this turnover limit. Previously it wasn’t a problem but suddenly it might be. To answer – at the moment neither is registered for GST so no BAS. Its just done at EOFY with my personal tax.

    Yep just two spreadsheets, one for each business at the moment.

    Looked at Xero – OMG expensive. Looks great, but way too expensive on top of all the other subscriptions – email, website, software packages etc.

    Looked at MYOB – haven’t heard anyone but accountants say its good to use or that they haven’t lost data at some point.

    Currently looking at Reckon 1. Love the price point, and the bolt on options. I don’t need to invoice from there as I use another online time keeper for invoicing.

    ThexArm, post: 212080 wrote:
    Yes, creating a pty ltd company is another option. You may not need to create 2 companies as you can continue to provide design services as a sole trader. By having a separate pty ltd company you may get extra time to reach your turnover limit as 2 businesses will be treated separately.

    Thought about this but also like the idea of selling the design business in the future. Got some things in the pipeline for this which might make it fairly attractive to be bought by larger agencies.

    #1181814
    ThexArm
    Member
    • Total posts: 253

    Yes, the companies you mentioned are big three in that space and all have bigger and bolder plans in the cloud business management area. There are a lot of added applications available to specialized businesses. The subscriptions are expensive but worth it if you consider the simplicity and time.

    Good luck with you plans.

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