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Help! Do I need a company?

Discussion in 'Legal Issues' started by OliviaVIC, 19th Oct, 2015.

  1. OliviaVIC

    OliviaVIC Member

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    Hello I'm Olivia and I'm new here .

    I've got a couple of little properties and now I'm going to start a little company (bookkeeping). I have heard it is better to operate as a company/trust but I am getting really confused. It would be so much easier & cheaper to operate as a sole trader.

    Does operating as a company/trust really protect my assets that much more than as a sole trader? I mean I could still get sued as a person anyway right?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Whats the goal for the business? Do you think it'll grow much? Will it have employees? Will it have partners?

    There's more to company or trust than being sued, there's also tax to consider.
     
  3. OliviaVIC

    OliviaVIC Member

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    It'll probably just be me. If I get busy I'll probably get a part-time helper.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Companies limit liability. Usually the director is not liable for the debts of the company and the shareholders cannot be liable (unless personal guarantees given).

    With a business there will be risk. Clients may sue for example. Not sure how much of a risk it could be for a book keeper but I guess you could add up numbers wrong and this could cause tax calculations to be wrong which could lead to mistakes being made = negligence.

    if the company is the one operating the business and contracting with the clients this would largely protect you and your personal assets.
     
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  5. OliviaVIC

    OliviaVIC Member

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    Oh ok thanks @Terry_w. If I made a mistake and my client sued, do they have to sue the company or would they be able to sue me personally as well ?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Generally they would have to sue the one they contract with which would be the company. But it would depend how you conducted your business. You have to make sure it is clearly the company they are contacting and dealing with, not you personally.
     
  7. OliviaVIC

    OliviaVIC Member

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    Ahhhhhhh got it, thankyou again @Terry_w. What is the best way to make it clear they are contacting and dealing with the company and not me personally? Charging them by an invoice with the company name on it? Maybe using company email account also? Or some other way of making it clear? Would I have to have a separate phone number for the company, or transfer my personal phone number to be owned by the company?
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    BAS agent ? etc ....PI insurance of course ....It may give a degree of asset protection.

    One thing you will NOT have as a sole trader v's company is workers compensation insurance. That could be worth a bit if you had a workplace accident. As a sole trader you are NOT insured.

    I have a client who is a bookkeeper who did exactly that while in a Maccas during a work day. Slip and fall injury its he said / she said despite camera.
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Make sure that in all dealings with clients that they realise that you are acting in your capacity as employee or director of the company. To do this

    - Use work email

    - Use a signature block with name of company

    - Invoice using company ABN and address

    - Never use personal bank accounts

    - Don’t use the words “I” say “The Company” instead.
     
  10. OliviaVIC

    OliviaVIC Member

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  11. Elives

    Elives Well-Known Member

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    so director is usually not liable for debts. but when the company takes out a loan of some sort. (personal guarantees will have have to be given in order to get the loan?) also if say it was a building company and they bought a lot of material on credit from a supplier. this type of arrangement would they have to give a personal guarantee?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, directors have to be careful when causing the company to enter contracts as often there are personal guarantees involved.
     
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  13. OliviaVIC

    OliviaVIC Member

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    I didn't think of that. These comments are really helpful. The more the better !!
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Good point. Most trade credit facilities include a Directors guarantee of some form. Even secured finance like HP etc will have a Director Guarantee. These "floating charges" come up with banks, finance companies and even stores like Bunnings with store credit accounts for builders etc. The bigger the business the bigger the issue as it tends to snowball. And its often joint / several if there are multiple Directors.

    In a liquidation its not uncommon that the Directors guarantees all surface and its a major cause of personal bankruptcy. And few people can recall or identify these liabilities.
     
    Terry_w likes this.