SETTING UP A NEW BUSINESS — WHAT TYPE OF ADVICE IS REQUIRED
For anyone contemplating commencing a new business there is a myriad of factors to be considered in determining the best type of business structure for you not only in so far as:
- distributing income;
- protecting your assets;
- lawfully reducing your taxable income;
- types of insurance to be taken out.
At Hatzis Lawyers we believe that it is imperative that a person commencing a business consider an initial joint consultation with both their Accountant and Solicitor. The Solicitor will be able to provide proper advice on the benefits and liabilities of the proposed business structure whereas the Accountant can provide the financial advice on each type of structure taking into account the client's particular needs.
The matters to be considered in setting up the business include:
- the proposed length of the business (ie. how long do you wish to keep it?);
- the proposed turnover of the business;
- the number of operators and/or employees;
- the nature of the business.
The most common ways to commence a business is either a discretionary family trust or company structure. A company only pays 30 cents in the dollar but also pays that amount on any capital gain. A family trust, if there is no distribution, pays a higher amount. If the beneficiary under the trust is in a low tax bracket they would only pay tax on their income at the bracket rate they are on. No allowance is made for selling businesses and turning over the proceeds into a new business. An accountant can provide the proper advice as to when these allowances are available.
Recently this firm has been involved in a matter where a property has been transferred from one entity to another. The cost of the transfer including stamp duty has been in excess of $70,000.00. However the potential benefit to the client runs into hundreds of thousands of dollars.
We would therefore suggest that if you're contemplating a business venture that advice be taken as soon as possible and certainly before the contracts are signed. If the wrong structure is used then there may be substantial stamp duty implications in re-organising the structure.