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Sole trader or company

Discussion in 'Small Business' started by annaw5599, 18th Apr, 2016.

  1. annaw5599

    annaw5599 Active Member

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    Hi guys just after some accounting advice I guess ... I posted previously that my hubby and I are looking to purchase an established bike business. Are we better to purchase and register as sole traders or have it listed as a company? Pros and cons please. We will probably only employ one employee initially in a casual capacity. Will be a new business name etc. I understand sole trader is more risky in some respects... But we are not borrowing money from the banks to purchase so not as risky in some ways. Is it easy to intially register as a sole trader and then transfer to company if need be ? Very new to all this so have a lot to learn in the next couple of months !
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Company for sure - limits liability. You have risk because of staf and customers.
     
    Propertunity likes this.
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Speaking as a business owner, I'd go with a company.

    A sole trader or partnership means you become the business. Your personal and business finances can be separate but the lines do tend to get blurred. A company helps to keep things separate (although many people still manage to mix things up a lot, mostly because they want to reduce their tax bill).

    From a liability perspective a company wins hands down.

    The only real benefit of a sole trader or partnership arrangement is it's a bit cheaper in registration and tax related costs. This is pocket change if you're intending to build a serious business.
     
    Scott No Mates and Propertunity like this.
  4. Aaron Sice

    Aaron Sice Well-Known Member

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    why not a PTY LTD ATF a Discretionary Trust?
     
  5. datto

    datto Well-Known Member

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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    say you wanted to bring in a 'partner'. It would be easier to transfer shares in a company rather than part of a business.
     
  7. RPI

    RPI Property Lawyer, Town Planner Business Member

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    Definitely my preferred method with related parties and when no intention to bring in investors.

    If investors coming in then maybe Pty Ltd atf Unit Trust.
     
    Aaron Sice likes this.
  8. geoffw

    geoffw Moderator Staff Member

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    Just in case you don't know. ATF means "as trustee for". The company controls the trust.

    That provides another level of protection, especially against your non busines assets.
     
    Aaron Sice likes this.
  9. annaw5599

    annaw5599 Active Member

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    Thanks everyone for the advice. I'm sure to ask further questions in the next few months !