Setting up a new business is an exciting time, but it can also be overwhelming, especially when you have a lot of competing priorities. It’s not necessarily complicated, but it’s a step that’s important to get right because having the wrong structure could cost you dearly.
A lot of people start out as sole traders, which is understandable in those early days if you’re one person with a business plan and some big dreams. But what we often see at Dollars + Sense is that those sole traders can do really well, and suddenly need to evolve into something bigger. So it can be beneficial to pre-empt that growth and structure your business accordingly from the start.
One client of ours, Vanessa*, learnt this the hard way.
Vanessa thought she was doing the right thing when she set up her business. She bought her domain name, and registered her business herself, as a sole trader with ASIC.
The problem was, Vanessa became very successful, very quickly – which is a nice problem to have! But she found herself needing to change structures, fast.
Vanessa needed to move into a trust structure because of the way the business had grown so rapidly. This restructure meant that the new entity was essentially buying the old one, and Vanessa had to pay capital gains tax on the difference between the value of the business when she started it, and the value of the business when the trust bought it.
That’s a tough expense to swallow when your business isn’t changing hands. On top of that, the actual act of restructuring the business cost Vanessa too, because it’s not a simple set-up.
All of this could have been avoided if she’d sought advice from a good accountant in the beginning.
Vanessa’s experience is a common one, and it’s entirely avoidable, so we always recommend you have an accountant to help step you through the process and ensure you’re set up with the right business structure for your needs from the start. (We have some excellent partners we can refer you to.)
From there, Dollars + Sense can help you move forward and grow your business with our comprehensive bookkeeping services, setting up your Xero bank feed, Xero timesheets and Xero payroll and getting your accounts in order and ready for success.
Want to start your business with the right advice?
Dollars + Sense offers tailored and personalised outsourced bookkeeping services so that you get the most bang for your buck and help you to easily make sense of your dollars so you can get on with managing your business for growth.
Request a quote and find out how we can help you grow your business.