If your goal is to evolve and grow your business, you may find something that was once appropriate, no longer suits your requirements. This could be anything from the size of your commercial space, employees, systems or even your entire business structure.
In an article written by Accountants Australia, they have pointed out that in Australia it is not uncommon for growing businesses to transition to a company structure. However, there are certain things that you need to be aware of when the time comes.
Why would you change from a sole trader to a company?
Sole traders and businesses are taxed differently – where sole traders are taxed as individuals, companies are taxed as a separate entity.
When it comes to taxes, there is a range of differences between sole traders and companies, including how you report income (type of return), what you are and aren’t required to report and the tax rate.
There are also clear distinctions in regards to:
- Paperwork and bookkeeping;
- Ongoing costs of operation;
- Who is liable for business debts;
- How business income is assessed;
- Employment regulations; and
- Control of the business.
So, why might you want to transition to a company structure?
When you operate as a company, your personal assets are protected to some extent, from business losses and issues.
Furthermore, income can potentially be split between owners – which can be advantageous around tax time. If you have big plans for growth, you’ll also likely want to make the switch, as companies have a greater ability to bring on new co-owners.
How do I make the change from a sole trader to a company?
If you’ve decided to make this change as part of your small business strategy, you know what it will mean for your business, but what about for you?
The role of the company director or officer will expand, so be sure you understand what you’re personally liable for as well as your new obligations.
Under the Corporations Act 2001, directors are required to perform a number of duties that range from preventing the company trading while insolvent to reporting to avoiding conflicts between the company and personal interests.
Next, you’ll have to apply for a company name through ASIC, then apply for a new ABN, as well as for other registrations, such as GST and PAYG withholding.
From here on out, things will be new for you – taxes, responsibilities, asset protection and operational costs are all a bit different for companies.
That said, it’s a necessary step in growing your business – ensure you have the right advisers in your corner, and the transition will be seamless.
How can FlexiFund It help?
Once you have transitioned to a company structure, now is the perfect time to think about how you are going to protect your cash flow, by collecting money owed to you from your clients for your professional services.
Why not provide your customer with a flexible payment plan option, all while you secure the full payment of your services?
- The FlexiFund It fee funding software is an easy-to-use solution for funding and managing client payment plans.
- Easily set up multiple payment plans with direct debit and credit card support. Create customised payment plans based on your committed term, frequency of billing and start date.
- Manage your payment plans on one platform and eliminate manual calculation, collection of funds and company overheads.
- Minimise the risk of your clients defaulting on their payments through a fully automated software.
FlexiFund It is a simple way to add a new, profitable income stream to your business all while providing a valuable financial service to your clients.
Retain more customers, improve your services and grow your client base.
If you would like to learn more, please contact us today.
P: 1300 850 890
M: 0416 978 184