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Set your business up for success with the right structure

Set your business up with the right structure

Before you start a new business it’s essential to make sure you’re choosing the right structure for the long term.

The business structure you choose can have big implications down the track, so it’s best to set up for success from the beginning.

The structure of your new business has repercussions in terms of tax, costs and the protection of your assets. When you decide on what structure you’ll use, keep in mind your future plans, because this may impact your decision.

There are three main structures you could consider.

Sole Trader

If you’re operating on your own, this may seem an obvious choice. It’s a quick one to set up and incurs minimal costs. Bear in mind that a sole trading business can be trickier to sell, and you are taking on greater personal risk in establishing the business. It may be worth looking into how you can protect your personal assets, should anything go wrong.

Partnership

If you’re working with a partner, you could consider this option. It lets you share the load, along with the costs of getting a business established. You’re also sharing the risk and potential liabilities.

Company

Setting up a company means more admin and higher costs to get going. You’ll become a ‘director’ as the person who runs the company, and a ‘shareholder’ as a part-owner. Companies have additional reporting duties, but you assume less personal risk. Also, the clear structure and reporting involved, may set you up for an easier sale when the time comes.

You could also consider setting up a trust, but as this is a relatively expensive and complex undertaking, it’s less likely you’ll go this way initially. You can change the structure as your business develops, but it’s important to consult with your accountant, lawyer or advisor as you go.

Before Deciding

Before deciding, think ahead to the future you want for your business. Ask yourself:

How am I hoping to grow the business?

If you plan to bring on additional people to run the business alongside you, a company or partnership arrangement may suit.

When do I want to sell the business?

Again, while selling any kind of business is possible, the clarity provided by a company may be an advantage and make your business more attractive to a buyer.

How sure am I that this business will succeed?

It may be that you are setting out to prove a concept or explore a business idea. If this is the case, you may not look to incur too many costs up-front, and a sole-trader or partnership model may appeal.

Whatever you decide, make sure you understand the tax implications. Talk to us before setting out on your new venture.

All you need to know about single touch payroll

Single touch payroll regulations may require you to make some changes. Automation or outsourcing will make compliance less of a time burden for your business. We can help.

Single touch payroll (STP) is a new regulation that changes when and how small businesses report payroll activity to the Australian Tax Office (ATO). Businesses used to report this information to the ATO once a year. Now, they need to send a report after each payday. And those reports must be submitted digitally, using a very specific format.

Changes to when you report payroll

Small businesses used to finalise their payroll records at the end of the financial year and produce:

a payment summary annual report for the ATO, stating how much the business had paid in salary or wages, the PAYG withheld, and some superannuation contributions they’d made
a payment summary for each employee, stating what each employee received in wages or salary, the payroll taxes collected from their pay, and some superannuation contributions made on their behalf.

No more payment summary annual reports

Because you’ll be updating the ATO on a pay-by-pay basis, you won’t need to prepare a payment summary annual report anymore. You’ll just let the ATO know when you’ve made your last pay run of the financial year for your employees.

Payment summaries won’t need to be sent to employees anymore, so employers won’t be required to produce them. The ATO will use single touch payroll reports as the sole record of salary/wages paid, taxes collected, and superannuation contributed.

Your employees will be able to see the information that would normally be on their payment summary by logging on to myGov.

You’ll need to report payroll online

There’ll be no more paper forms for reporting your payroll activity to the ATO. You’ll need to submit the information online, using a specific format known as SBR (Standard Business Reporting). Depending on how you do payroll now, you may need to change software or find a service provider who can produce compliant reports for you.

When is the single touch payroll deadline?

Small businesses with fewer than 20 employees don’t have a confirmed deadline for switching to single touch payroll. However, small business advisors expect it to be compulsory from 1 July 2019. Businesses with more than 20 employees switched to single touch payroll on 1 July 2018.

Your options for switching to single touch payroll

To be ready for the switch, you’ll need to make sure you can submit compliant reports every payday.

Here’s what it means:

If you use online payroll software, it should be able to handle the job. Just make sure it produces ATO-compliant reports.
If you use desktop payroll software, you’ll need to find a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
If you use spreadsheets or pen and paper, you’ll need to find a service to convert the data into a compliant digital report format and submit it on your behalf.

We can answer your questions about single touch payroll. Book an appointment now.

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