Today we come to talk about the business form of Australia. The most common and important forms of business in Australia are as follows:
- Sole Trader (self-employed households)
- Partnership (partnership)
- Trust (Trust)
- Company (Company)
So what are the differences between these different forms of business? What are their strengths and weaknesses?
Sole Trader (self-employed households)
As the name implies, Sole Trader is a form of personal business, common in very small businesses, such as street stalls. To sum it up with an inappropriate word is the distinction between public and private. Individuals are fully responsible for the business, personal assets are the assets of the business, business income is personal income.
Just the Australian business registration number (ABN) and name, you can start operating Sole Trader. Without the need for additional bank accounts and other complex procedures, it is the simplest, most convenient and cheapest form of doing business in Australia.
However, since Sole Trader does not constitute an independent legal person, it is not actually a form of company. Therefore, if the business is insolvent, personal assets need to be recovered.
Example: Xiao A wants to make his own pancake shop, take out his savings of 10,000 yuan, rent the store, buy equipment and materials, and prepare himself for a big fight. In this case, little A is Sole Trader..
Unexpectedly, the Australian people do not like miscellaneous pancakes and prefer junk food. Little A received half a year of money can only reluctantly buy raw materials, but unable to pay rent and gas fees. A year later, Xiao A decided to close the store and sell ingredients and equipment. The pancake shop still owes 1000 yuan in rent. Little A needs to be repaid by individuals for this 1000 yuan.
Partnership (partnership)
Partnership is another form of business, usually established by several people, so it is named partnership. There are many similarities between self-employed households and partnerships, such as not constituting a single legislation, unlimited liability and so on. On the other hand, partnerships are somewhat like the combination of multiple self-employed households (up to 20 people). Everyone gives money, everyone contributes, everyone shares money. This form is common in small businesses between friends or relatives.
Partnership also has many branches, such as limited partnership, special general partnership and so on, these different forms of partnership because of its strong professionalism and length of relationship, do not make a detailed introduction, the common is lawer, accounting firm.
Example: little A is very unwilling after the failure of pancake fruit shop. So he found Xiao B and Little C and decided to open a dairy tea shop together. Small A, small B and small C contributed 5000 yuan, 3 000 yuan and 2000 yuan respectively, a total of 10, 000 yuan. In this case, the dairy tea shop is the form of partnership.
In the first month, the milk tea shop relied on the concept of new stores to make a net profit of 1,000 yuan. The three partners distributed according to the proportion of the original investments.Ten million yuan didn`t think that the milk tea shop competition was very fierce, the rest of the financial year, the milk tea store lost serious. After the assets sold the external debt of 20,000 yuan. In this case, small A, small B and small C need to contribute 10,000 yuan, 6000 and 4000 yuan to repay the foreign debts.
Trust (Trust)
Trust is when the principal (Settlor) puts the assets into the main body called the trust (Trust), which is operated by the trustee (Trustee), and the resulting proceeds are distributed to the beneficiary (Beneficiaries). According to the designation of the principal.
The establishment of trust is complex and expensive. Australian trust is often used as a means of family financial inheritance or tax avoidance.
Company (Company)
The company is perhaps the most familiar form of business. It is different from self-employed, partnership, the company constitutes a separate legislation. In other words, the company can prosecute or be prosecute.
In addition, the second main difference between it and the above form is that the company is limited responsibility system. In other words, the personal assets of the company holder will not be recovered because the company is insolvent.
- According to the limited responsibility system, the company can be divided into two categories: limited joint-stock company, guarantee liability company.
- The (limited by shares) of the limited stock company is composed of shares, and the shareholders are responsible to the company by subscribing for the shares. If the shareholder pays the shares in full, no matter how the company changes, the personal assets of the shareholders will not be affected in any way. If the shareholder owes the amount due, the liability of the shareholder is limited to the part of the amount payable, and the vast majority of commercial organizations are limited joint-stock companies.
- Guarantee liability company (limited by guarantee) is a guarantee amount made by shareholders to the company. Within a certain period of time after the company is insolvent and liquidated, the shareholders must provide the guaranteed amount. This type of company is common in non-profit organizations.
- According to the characteristics, companies can be divided into listed companies and private companies. The former can be financed in the market, but the cost of regulatory compliance is high. The latter is relatively less regulated, but unable to finance freely in the market, or Pty (private). For short
- According to the scale, the company can be divided into two categories: small company and large company. Small companies can get some concessions in tax and related policies.
Then let`s talk about these business forms of tax and debt liability.
Sole Trader (self-employed households)
Individuals can register their own company number with the Australian Inland Revenue Department (ATO). In short, they can register their own company number with the Australian Inland Revenue Department (Australian Inland Revenue Department). When filing tax annually, individuals can use their personal tax number (tax file number) to file tax returns. Because Australia has a goods and services tax (Goods and Services Tax), under the same ABN, an annual income of more than A $75000 is registered and taxed on goods and services. In other words, if the ABN has an income of more than A $6500 a month, individuals need to consciously register for a goods and services tax, otherwise it will be regarded as tax evasion and tax evasion. Since self-employed households do not constitute an independent legal person, they are not actually a form of company. Therefore, if the business is insolvent, personal assets need to be recovered.
For a simple example, Little A works at IELTS training institutions in the form of a self-employed person, that is to say, IELTS training institutions pay for IELTS to provide invoices containing their own ABN to IELTS at a time, and IELTS can pay for the corresponding salary of Little A. However, if one month, because of her hard work, the boss gives her a salary of more than A $6500 for that month, Xiao A will have to register for the goods and Services tax (Goods and Services Tax), and pay A $650 (Australian goods and Services tax is 10 per cent).
Partnership (partnership)
Partnership is another form of business, usually established by several people, commonly known as lawer, accounting firms. Since partnership, like self-employed investors, is not a corporate form, each partner needs to share income and assume debt. At the same time, each partner uses his or her own TFN to register for tax returns, and each ABN earns more than A $75000 a year and is required to register and pay a goods and services tax.
Trust (Trust)
To put it simply, a family trust is a family investment structure composed of family members (spouse, children and other family members), and the trust income is distributed to the constituent members of the structure. It itself is a way of avoiding taxes, dividing profits among family members and making full use of the advantages of low-income people and low tax rates. That is to say, each member of the family trust accumulates all personal income in the form of individual tax payment, and if the beneficiary of the trust is a tax resident, he or she will be taxed at the personal marginal tax rate of (Marginal tax rate); if the trust beneficiary is less than 18 years of age, the tax rate is usually the highest tax rate.
Company (Company)
The company is perhaps the most familiar form of business. It is different from self-employed, partnership, the company constitutes a separate legislation. In other words, the company can prosecute or be prosecute. If the company is insolvent, the company must bear the relevant responsibility. In other words, the personal assets of the company holder will not be recovered because the company is insolvent.
On the tax side, Australia`s government in 2017 will adopt a step-by-step approach to the implementation of the new tax rate. Specifically, from July 1, 2017 (fiscal year 2017 / 18), companies with annual turnover of less than A $25 million will enjoy a corporate tax of 27.5 per cent (compared with 30 per cent for all previously). By fiscal year 2018 / 19, companies with annual turnover of less than A $50 million will be entitled to a tax rate of 27.5 per cent.
The tax cuts, which are part of (Malcolm Turnbull) government`s 10-year corporate tax cuts in Turnbull, Australia, aim to increase income tax rates from 30 percent to 27.5 percent by fiscal year 2023 and 24, from 30 percent to 27.5 percent, and fall year by year, and eventually to 25 percent in fiscal year 2026.
