Following on from this weeks earlier post regarding your structure, today we are discussing the concept of “sole trader”.

A sole trader refers to an individual who runs a business operation.  It is the individual who holds the Australian Business Number (ABN) and the operation may be performed in the individual’s own name, or a registered business name (ie: Joe Smith or Joe Smith trading as Joe’s Pie Shop).

The benefits of operating as a sole trader include:

• they are easy and cost effective to set up as there are no specific laws relating to the formation of a sole trader
• they are simple to wind up as there are few formalities other than paying your debts and notifying stakeholders and government departments
• the owner has freedom in decision making
• all profits belong to the owner
• sole traders are often known for having direct contact with clients and customers which creates a sense of personal service

Disadvantages of operating as a sole trader include:

•  while the owner takes all profits of the business, they also bear the losses and there is no distinction between business and private assets in terms of liability
• operating as a sole trader may lead to limited management and technical expertise
• raising capital can be difficult, good planning and budgeting is important
• all profits are taxed in the name of the owner which may be ineffective depending on the level of income

If you’d like to discuss your sole trader business, please complete the Contact page.

Regards

I find it ironic that I can go for a long time without touching on a particular subject…and then receive three enquiries in the same week regarding the exact same topic!

The topic of the week just gone was “structure”.

Each person in business must have a “trading entity”, and each investor must have an “investment vehicle”…but what do we mean by entity and vehicle?

Essentially, these terms all refer to the structure under which you operate.  There are a number of different legal structures that can be used for business or investment operations and the type of entity you use will depend on a number of factors.

It is not uncommon for people to refer to their “company”, when in fact they are talking about their “business name”, as such it is important to be 100% confident of the structure you operate within, as it impacts on your tax result, your liability and also ownership of assets!

The type of structures available for business and investment purposes include:

• sole trader
• partnership
• company
• trust
• superannuation fund
• not for profit

Over the coming weeks I will be taking a more detailed look at each of these – but please, I do ask you to remember that any information provided in this space is general in nature and should only be used in conjunction with personalised advice from your accountant.

Stay tuned…

Regards

It’s “Frivolous Friday” again and I wanted to share my recent experience of “true relaxation”.

Last weekend, as part of my ongoing 40th birthday celebrations, I was treated to a weekend at Hepburn Springs in regional Victoria.

I find it difficult to fathom that this place is practically on my doorstep, yet this was my very first visit!

But what surprised me more, was how deep in relaxation I found myself – I’ve never thought I had trouble relaxing, I mean I’m quite happy to have a quiet night in on the couch, but this was a completely different feeling!

Upon my arrival on Friday, I spent most of the afternoon and evening catching up with my good friend K.  We made a quick trip out to grab some take-away for dinner, and then I was straight to sleep…for nine hours!

Saturday, we indulged in a late breakfast and a two hour massage before collapsing on the deck to enjoy a cheese platter and cider (it was perfect weather for this too!) – would you believe me if I said we had left-overs for dinner and then I had another nine hour sleep?  Oh, yes I did!!

With minimal social media use and flicking through a magazine to pass the time, I didn’t even open the novels I took, and I certainly didn’t read the information I had collected at a training session during the week – I actually found it really difficult to keep my eyes open!

I am positive the quiet rural atmosphere and change of scenery had something to do with this…but I’ve booked in for a mani/pedi tomorrow to try and keep that relaxed feeling, just in case!

Regards

Or maybe you’re just thinking of selling the house…either way it pays to be informed regarding any potential tax liabilities – agree?

When considering the tax implications of selling a house, you first need to consider the nature of the house, or the purpose for which it is held.

There are instances where taxpayers hold houses as trading stock, we won’t be discussing the tax implications in those cases here today – rather, I wanted to draw your attention to situations where houses are held as capital assets, and their sale may be subject to Capital Gains Tax (CGT).

It is widely understood that taxpayers do not have to pay any tax on the proceeds of selling their main residence – but if you have used your main residence for business purposes, there may in fact be a portion that is subject to tax.

In cases where the house has always been held as an investment, it is likely that the transaction will fall within the scope of CGT…

In either case, you should discuss the details with your accountant prior to arranging your sale, so that you are fully informed of the potential outcomes.

The type of information you’ll need to provide your accountant include:

• details of the acquisition date and price
• stamp duty and legal costs paid on purchase
• capital items acquired for the house during the time of ownership (including renovations)
• details of tax claims made (they may have this information if they have been preparing your tax returns)

Upon sale you will need to consider the following:

• sale date and price
• agent’s commission and other selling costs
• apportionment of sale price between property and fixtures and fittings

Your accountant will let you know if they need any further information, but having the above items ready will be to the benefit of both you and your accountant – and even if you’re not ready to sell, it’s a great idea to collate this information and keep it in a safe place anyway!

Regards