In Australia, there are normally seven major business categories to choose from, each with its own set of distinct qualities. Let's take a closer look at each one.
1. sole proprietorship
A sole trader is the simplest sort of Tradies business brisbane to establish. All you really need is an ABN to begin earning. If your annual salary exceeds $75,000 or you operate in certain businesses such as taxis or ride-sharing, you must additionally register for GST. This entails keeping accurate records and properly collecting, reporting, and paying GST.
As a single proprietor, you do not need to file a separate tax return; instead, you record your business revenue as part of your personal return. This means you pay the same tax rate as an individual and may be eligible for additional benefits such as the Small Business Tax Offset. You own the company, no one makes decisions for you, and you may run it anyway you choose.
2. Collaboration
A partnership is also relatively simple and inexpensive to establish, with the primary distinction being that the partnership requires a new tax filing number. This implies you must file a separate partnership tax return, but the partnership does not pay income tax. Each partner declares their share of the partnership's income on their personal tax returns.
On the bright side, it's a terrific method to share a business's income, but it also means sharing losses and power. Even though it is not required, a partnership agreement in paper is a good idea to ensure that everyone understands their expectations and responsibilities.
3. Limited Liability Company
A limited partnership functions similarly to a regular partnership; however, it frequently comprises one person who works in the business and another who is more of a financial partner. This is a common business form in the United States, but it is still relatively new in Australia, thus the taxes standards are somewhat hazy.
This type of business is typically associated with venture capital operations; for example, an entrepreneur may require funding to launch their business. They recruit a financial partner, but that partner is not involved in the day-to-day operations of the business.
4. Trust
A trust is a more difficult sort of business, although it is very popular in Australia. It is more expensive to establish because a legal deed defining how the trust will operate is required. Income from a trust is transferred to beneficiaries, but there are different ways to distribute income, which impacts how tax is paid.
5. Proprietary Limited Partnership (Pty Ltd)
A proprietary limited (or LLC) is reasonably simple to establish; but, record-keeping is more complicated. A set of bylaws, company directors, a business name, a tax file number, an ABN, and business bank accounts are required to establish a Pty Ltd company in Australia.
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