It is common to see the majority of small businesses first start out as sole proprietorships – mostly because the startup costs and formalities are lower. Yet these business structures often later merge into partnerships or co-operations due to reasons such as shared responsibility or chances to increase profits or goals. Part-time business owners often start out this way too, especially if they have a regular occupation.
Are You Just Starting Out?
As mentioned above, small starter businesses find it easier to set-up a sole proprietorship. Of course finding the right kind of business partner can help you create a partnership easily, than taking a risk being the sole owner. Starter businesses will generally have issues at the initial stage that you will have to deal with – but the profits will go to one person and you can change the business structure easily when necessary.
Consider The Pros and Cons
While starter costs are lower, the tax return is the same as an individual tax – which might be a hindrance for a starter business that is only starting to make profits. While the business owner retains full control and privacy, the liability and risk is higher for sole business owners. Business dealings will need to be carefully when starting out, with lower financial risks. It can also be hard to raise capital for a sole proprietorship when compared with a partnership or a limited liability. This can affect expansion unless the owner had enough capital to start with.
Taxes, Profits and Insurance
While sole traders can hire employees for a business the owner is not considered as an employee and will not have to pay payroll tax – they will also have their individual tax file number for sole trader tax. All profit goes to the sole owner, and liability includes personal assets and joint assets that are shared with another person too. It is also advisable to look into insurance plans that are suitable, as you will not be covered by worker’s compensation if you are injured while on duty.
Be Aware Of Liability
It is common for failed business ventures to end up losing their assets when there are unpaid debts to suppliers, expenses etc. This issue can even arise in businesses where the operational risk is high. So making wise business decisions without taking unnecessary financial risks during the initial stage is quite important – this includes having a solid business plan to calculate the profit and losses that will be faced. Starting a business is always a risk, but making the right decisions can go a long way.
Recently I had a conversation with someone who worked in a law firm about a case they had at the time and the legal services she was offering to her client. The case involved a young woman who had been in a relationship with a guy, he became abusive and she ran away to her parents’ home in the country to be safe and live with them. Too scared to take her things, or go back she left her car at his house. In the two years they were apart he worked up $67, 000 in fines. This included parking fines, speeding fines and registration fines. Because they were registered as living together all these fines were sent in the mail to him so she never knew until they organisations fining her found her new destination. She could not afford the fines, and believed she had a case against her ex boyfriend. After hearing this I wondered how easy this would be to prove.
I wonder how much evidence would be necessary for her to prove that she had not been using the car. Unless she had made a statement when she left her boyfriend or had proof that she was living at her parent’s house all the time I wonder if it is far too hard to make a solid case. This made me wonder if more CCTV cameras and intensified observation is the only way we can collect evidence of things that we did not know we would have to prove at one date. Then again the idea of ‘big brother’ and being watched all the time is a daunting and scary thing. It can have dangerous repercussions, and leave us all in a position where we feel like we cannot do anything without being scrutinised for it.
These can’t be our only two options, yet alternatives do seem implausible. No matter how much you tell people to keep records of everything, that is easier said than done. That is a lot of effort often when you cannot have foresight of relationships breaking down, or someone ripping you off, or anything along those lines. I think we are luckier these days that we use the Internet so much, which can save unlimited data; we can often trace back our lives and our conversations. Then again there are still issues with this as well, as people are constantly worried about their privacy online, and who can access it. We don’t really know what information about us is known online and who can get to it, and although it may help us with legal issues it also helps companies exploit our likes and needs. Then legal services by family lawyers Gold Coast can come in to deal with these privacy issues. Really we are stuck in a position of how much should be recorded and kept and how much can we afford to forget and have no proof of?