How to choose the best tax structure for your business
If you’re starting or running a business, one of the most important decisions you need to make is what kind of tax structure to use. Your tax structure affects how much tax you pay, how you protect your personal assets, how you deal with changes in ownership, and what kind of paperwork you need to do.
There are different types of tax structures in Australian tax law, and each one has its own advantages and disadvantages. To help you choose the best one for your situation, here are some questions you should ask yourself:
- What kind of business do you run?
- What are the legal and regulatory requirements in your industry?
- How much income do you earn?
- How do you plan to grow your business?
- What are your goals for your business and your lifestyle?
Company
A company is a separate legal entity that can own assets, incur debts, and conduct business in its own name. A company is owned by shareholders and run by directors. You can be the sole director and shareholder of your company, or you can have multiple directors and shareholders.
Some benefits of being a company are:
- You have limited liability for the debts and losses of the company.
- You may pay less tax than other structures if your income is low or reinvested in the business.
- You may have access to various tax concessions and incentives.
- You may have more credibility and flexibility in the market.
Some drawbacks of being a company are:
- You have more paperwork and reporting obligations than other structures.
- You may pay more tax than other structures if your income is high or distributed to shareholders.
- You may have difficulty changing or exiting the structure.
- You may have conflicts or disputes with other directors or shareholders.
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MDB Taxation and Business Advisors can help you
Choosing the right tax structure for your business is not a simple task. It requires careful consideration of many factors, such as:
- How to minimise your income tax liability
- How to maximise your asset protection
- How to accommodate new investors or partners
- How to comply with all the legal requirements in your industry
- How to access capital gains tax concessions in the future
- How to use a corporate structure to win more business
Whether you want to operate as a company, a partnership, a trust, or another structure, we can help you make the right choice. Contact us today to find out how we can help you achieve your business goals.