spending 50k on car and equipment for new business legal/tax

i will be able to make money, i'm just unsure of how much. and i'm unsure at how much money p.a is it worth going company. etc if its 50k then i'd go company straight away.

i'm not sure how much i'd make first year but after first year i would think profit would be 100k p.a at least.

i'm trying to figure out if it's like (if you make under this amount stay sole trader, if over this amount go company structure)

EXCLUDING ASSET PROTECTION PROS/CONS

Cheers, Elives

 

The trustee may not distribute income but there are consequences.

 

This will depend on your other income and that of your family members - this is the tax side.
Think about the non-tax issues. Setting up a company later may be transferring assets across. Need to consider stamp duty and CGT issues.
Estate planning - how do you pass on a sole trader business? Not as easy as a company.
Bringing in people - such as 'partners'.
Separate legal entity means you can lend money to a company - can't lend money to yourself or contract with yourself.
etc
etc

 

starting my own business would be the only source of income, if i purchased 50k worth of equipment in my own name. and then 2 years down the track started using company structure would i need to transfer the car / 15k worth of tools over? is there any tax reasons for this?

Cheers, Elives

 

so basically if it's being used on someones taxable income it has to be physically given to that person? so this would only really work if you had a spouse / highly trusted family member.

 

You can only deduct expenses associated with your income earning ability. You might be able to claim the same car expenses if work related. Don't know what sort of tools you are talking about, but, as an example, if a lawyer subscribed to some law publications they could claim these as related to their work as a lawyer, if they later incorporated a company and were a director or employee they could still claims those costs as it still relates to income.

but lets say you are a pizza maker, if you buy a pizza oven in your name and later set up a company you could not claim depreciation on the pizza oven you own as it wouldn't relate to your income earning activities as an employee - a different entity is producing the income. At this point you could sell the pizza oven to the company though.

You also have to think of the transaction costs - contracts between you are the company, market rates etc.

 

No it doesn't have to be given - but if it is not then it is a UPE with consequences so best to give. It would work if you were an orphan on a deserted island potentially. A company could be a beneficiary for example.

Also consider a simple issue. If you resign from work, you may have little income coming in the first year and the expenses may be a lot. If self employed your taxable income could be zero - a waste of a tax free threshold. If a company the company could pay you $20k wage - on which you would not be taxed, but the company could claim a deduction, which could help save future tax.

 

so in that scenario

1. sole trader say i make 18.2k i pay 0 tax.

2. company pays 0 tax as it pay 18.2k as salary to employee/director (me)?
and then me as an individual pay 0 tax.


how does option 2. benefit more?

 

What if there is $0 income?

 

for which one? 0 income = 0 tax? is this a trick question :s

Cheers, Elives

 

You haven't understood my example
It shows how not to waste a tax free threshold.

 

if i understand correctly.

sole trader 0 income would be a waste of that years deductions which would be depreciation on 30k car. and same with business equipment. and other deductions.

but if it was company i could carry forward these deductions to the next financial year to save money on tax?

Is that your point?

Cheers, Elives

 

If you have 259k in the bank and want to start a business you have the ability to afford quality, specific advice tailored to you and your situation, spend the 500-1k and have the comfort of starting off right instead of throwing 50k down to a purchase and skimping on structure advicwle

Personally I think not being too concerned about an extra 20k for a new car Vs 2nd hand (as is your right to do so) but not wanting to pay the pocket change Costs to establish a company or get advice in structures is kinda like spending years studying all about how to nail job interviews and none on how to do the job required, sure it might look impressive but it's not really the way forward

 

Best post in the thread and relevant in so many instances imo

 

Really, you are going to spend that much money on a van and equipment, but dont want to spend a few thousand on registration, licencing and other associated costs ?
So when you go from sole trader to a company all your paperwork, letterheads and domains have to be changed
Best to set it up properly to start with

I registered my business with myself and partner (spouse) as shareholders, that way when there is profit to be allocated we take a dividend (also pay each of us wages as it suits me to do).

 

half of that post is incorrect. as stated above in my reply to that post. the only thing i do agree with from that post is "And the equipment? Is there a way to hire things until you can work out whether the business is going to succeed?"

in my circumstances this is my career path / i'm over working for someone. so i don't see my self failing at being self employed.

Cheers, Elives

 

where did you pull 259k from?

and what do you mean by not to concerned about paying an extra 20k? you're saying it as if theres no value to it.

buy brand new 45k
buy 2nd hand with 25,000-35,000kms for 30k

The diesel work vecicle will go at least 300,000kms so the 2nd hand car only has 10% more kms then the brand new car but for 34% less of the price.

i've come to the forums to ask other small business operators / people who have done this what they found best from their experiences. why do people ask other people's opinions on where to purchase when they have money and can pay a buyers agent to source this for them?
at this point in time not being to sure about what i was asking prior with the set up i do not see the value in spending $500-1,000 for an hour of professionals time when i'm not even sure of what to ask. least here i can come back and read other peoples thoughts on the best way of doing it / how they did it.

Cheers, Elives

 

my business is a trade business, how much do you think it would cost to change business cards, templates & domain? $300? i honestly don't know about domain. but all up i didn't think it'd add up to be much. i can understand if you had a different type of business though.

i'm not against company structure. i just figured i'd easy into thats all. i spoke to my accountant and he recommended me going sole trader to begin with and can always transfer over to company later. i only started this thread to get other peoples opinions on it. and it seems everyone says go company. yet i don't see the value in it for me in my situation (considering the extras costs from get go) from what people have posted for reasons for it.

Cheers, Elives