Partnership Assistance
PARTNERSHIP
Whether you are venturing into a new partnership or are already established, we have dedicated accountants who can help your partnership business with all of your tax and accountancy needs.
A business run as a partnership shares control, responsibility and finances between two or more people. The partners are not only responsible for managing the business, but also “jointly and severally” liable for any debts incurred by the business and the profits are shared between the partners based on pre-agreed percentages.
COMPANY
One trading option for a business is to operate as a limited company. This will provide access to a number of tax planning strategies and limited liability status. Although there is perceived prestige in operating as a limited company you will lose some of your privacy – directors’ and shareholders' personal details and abbreviated accounts have to be filed and are open to public scrutiny.
A limited company is a distinct legal entity that is able to enter into contracts in its own name. The fact that the company is a separate legal entity from its owners is very important as it means that all the company's liabilities are the responsibility of the company - not that of the directors and shareholders!
The only exception is if you, as director of the company, offer a bank or other creditor a personal guarantee to repay the company's debt. In that instance you then become personally liable to repay the debt if the company is not able to.
Significant advantages:
- Limited liability status - as explained above, the company is a separate legal entity and this can protect your personal assets from business creditors if for any reason the company is unable to clear all of its debts and has to cease trading. Operating as such is especially useful if there are significant risks associated with your business activity.
Significant disadvantages:
- Possible double taxation - the company pays corporation tax on its profits and can only distribute the remaining profits, known as retained profits, to directors and shareholders. This can give rise to tax being paid by both the company and by the directors or shareholders when they extract money from the company.
- More cost - the professional costs for setting up the company and for preparing company accounts and tax returns can be higher than those you would expect to pay if you were self-employed. There are then additional costs involved with various Companies House requirements
SOLE TRADER
At Prime Tax Experts, we offer a number of accountancy solutions to assist you as a sole trader. Although being a sole trader is one of the simplest ways to get started in business, there are many processes that need to be followed to ensure that you are compliant with Australian Taxation Office requirements.
Advantages:
- Total control – You have total control over the business. Decisions can be made quickly and easily, from accountancy and financial decisions to general business decisions.
- Easy to change to another trading identity. It is relatively easy to change your trading identity from that of a sole trader to a limited company.
- Keep the profit – As the owner of the business, all the profit belongs to you.
- Business affairs are private – When you run an unincorporated business your accounts are not made available to the public therefore competitors cannot see what you are earning hence they will know less about how your business works and how it succeeds.
Disadvantage:
- You are personally liable and accountable for all your businesses debts - Should your business fail you could end up losing your personal assets such as your home, car, etc.
- Can be difficult to raise finance -When you run a small unincorporated business, banks will not lend you large sums and you may find raising finance for the business is very difficult unless you are prepared to change your ownership status.
- Can be difficult to enjoy economies of scale - Smaller business often find that they cannot buy supplies in bulk and do not enjoy the same discounts as larger businesses.
