Are you starting a business from scratch? Or are you trying to grow your existing one? The process can be challenging either way! Being an entrepreneur in Australia, you might feel overwhelmed as there are too many things to consider. Let’s learn more about corporate tax return in Australia.
Most entrepreneurs feel anxious while struggling with tasks like-
- Creating a business plan
- Pitching and onboarding clients
- Managing the cash flow
- Hiring staff
- Settling outside payments
- Buying inventory
- Handling client relationship
- Dealing with the corporation tax return and other tax-related issues
First and foremost, while starting a business, figure out which type of structure is best for your venture. Making the right decision is crucial because the structure you choose will directly impact- a) business registration process, tax position, and the safety of your assets.
Choosing the wrong business structure is one of the most common mistakes an entrepreneur makes. Let’s talk about the four main types of business structures in Australia so that things get easier for you.
4 Main Business Structures In Australia
- Solo Trader
Now, let’s discuss each of them in more detail!
In a partnership business, usually, two or more people join hands and have ownership of the venture. The partners share the expenses, profits, and losses of the business. However, the partnership should have its tax file number. Lots of tax filing companies in Australia are there to help you develop your partnership agreement.
- A partnership business always allows a fusion of different skills and ideas
- You might receive some tax advantages while filing a company tax return in Australia
- On the demise of one of the partners, the partnership automatically gets dissolved
- As per the agreement, the taxable income and the loss of the partnership get equally distributed. If there is no agreement, all the partners will get an equal share.
- The liability of the partners is unlimited. It often extends to their private assets
- A partnership business is eligible for lodging an income tax return.
- You and your business partners are equally responsible for each other’s share of business responsibilities
If you are planning to run a small-scale business, the sole trader structure is just right for you. You can often trade under your name or you can register a custom-made business name as well. However, as a sole trader, you are always liable to file a corporate tax return on your business income.
- As the sole owner, you have direct control over your business and all its success
- A startup requires minimal legal procedure and low cost
- As your business grows you can change the structure whenever you want
- You get a greater level of privacy
- It’s always easy to disband
- As a sole trader, you bear full responsibility for all the liabilities arising out of your business
- There might come a time when you have to pay business debts from your debts
- You have to pay the tax on all profits. It’s always better to seek professional guidance from one of the top-notch tax filing companies in Australia.
Usually, there are two types of companies: A private company and a public company. Like a partnership business, a company also has its tax file number.
- Liabilities are limited to your company assets only. It will never extend to the owner’s private assets.
- A single tax rate applies to all business taxes.
- A company is more expensive and complicated to set up
- You have to deal with additional financial and legal reporting obligations
- The structure of a public or private limited company might not be suitable for all business start-ups.
If you are signing up for a trust unit, a third party will have legal control to run the business. They will also distribute the capital or income between the relevant beneficiaries.
- There is the flexibility of income distribution
- Discretionary trust offers the greatest level of asset protection
- It can be difficult to dismantle
- You need to lodge a separate company tax return in Australia for trusts
Did you like any one of the options listed above? So, which ownership structure should you opt for? Well, it depends on your business goals and funding capabilities. Can’t you determine things on your own? Relax, the experts of Employ Remote are always here to help you! We have proven records in guiding entrepreneurs to choose the most suitable business structure.