In Australia, there are usually seven main types of businesses to choose from, and each has its own set of special features. Let's look at each type in more depth.
- Sole trader
The easiest type of Tradies business brisbane to start is a sole proprietorship. All you really need to start making money is an ABN. You also need to sign up for GST if your income is more than $75,000 or if you work in certain industries, like taxis or ride-sharing. This means keeping accurate records and figuring out how to collect, report, and pay GST.
As a sole proprietor, you don't have to file a separate tax return. Instead, you just include your business income on your personal return. This means you pay the same tax rate as an individual, and you may also be eligible for benefits like the Small Business Tax Offset. You are in charge of the business. No one else makes decisions for you, so you can run it however you want.
- Work together
A partnership is also pretty easy and cheap to set up. The main difference is that the partnership needs its own tax file number. This means you have to file a separate tax return for the partnership, but the income doesn't have to be taxed. Each person in the partnership says how much of the income they got on their own tax returns.
On the plus side, it's a great way to split the profits of a business, but it also means splitting the losses and the power over the business. Even though it's not required, it's a good idea to have a written partnership agreement so that everyone knows what their roles and responsibilities are.
- Private Company
A limited partnership works pretty much the same way as a normal partnership, but it usually has one person who works in the business and another who is more of a financial partner. This is a common way to set up a business in the US, but it's still pretty new in Australia, so the tax rules aren't clear.
Most of the time, this kind of business has to do with venture capital. For example, an entrepreneur needs money to start a business. They find a financial partner, but that partner doesn't really help them run the business day-to-day.
- Trust
A trust is a type of business that is more complicated, but it is very common in Australia. Setting up a trust costs more because you need a legal document that says how the trust will work. The income from a trust goes to the beneficiaries, but the income can be given out in different ways, which changes how tax is paid.
- Privately Owned Limited (Pty Ltd)
Setting up a proprietary limited company (also called an LLC) isn't too hard, but keeping records is more complicated. In Australia, you need a set of bylaws, company directors, a business name, a tax file number, an ABN, and business bank accounts to start a Pty Ltd company.
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