FINANCE Having decided that someone is deserving of equity, the style of equity they should receive is then a separate consideration again. There are again a number of options, which include: • Full equity • Dividend (profit) participation but not capital participation • Phantom equity (in other words, a bonus scheme of sorts) • Vesting equity (i.e. equity that vests gradually over time based on targets being met). 2. Choice of Trading Structure When we talk about ‘trading structures’, we are referring to a decision between sole trader, partnership, trust or company. Every circumstance is different and the right answer will sometimes be a combination of more than one entity. Utilising the wrong structure and needing to rectify it later on can lead to significant disruption and transaction costs, including capital gains tax and stamp duty. It pays to seek professional advice to come up with a structure that suits your circumstances, and is scalable and effective. Among the considerations when choosing a trading structure are: • Income Tax effectiveness • Capital Gains Tax friendliness in the event of a future sale • Asset Protection (both personal and for the business) • Liability • Estate and Succession Planning • Cost (establishment and ongoing) • Complexity • Ownership requirements. It may be cheaper to avoid using a professional, but a simple mistake can mean paying a much higher price. 3. Understand Your Statutory Obligations When you’re starting out in business, the excitement and frenetic pace can sometimes mean that the more mundane tasks can be neglected. It is important to understand which government identifiers you will need, including • Tax File Number (TFN) • Australian Business Number (ABN) • GST & PAYG-W Registrations • Business Name Registrations Similarly, try to develop an awareness of your reporting obligations and their timings. This refers to the likes of: • Financial Statements • Monthly or Quarterly Activity Statements • Annual Income Tax Returns • ASIC Filings (companies only) And then of course there is arguably the trickiest area of all – employing staff. This spawns a myriad of issues that you should seek expert advice on, including: • Distinguishing Employees from Contractors • Determining the status of employees, i.e. Casual vs Part-time vs Full-time • Ascertaining Rates of Pay (including Awards) • Understanding Leave Entitlements • Obtaining TFN Declarations and Choice of Super forms • Making Quarterly Superannuation Payments • Preparing Payment Summaries 4. Embrace Cloud Accounting Cloud accounting, sometimes referred to as ‘online accounting’, serves the same function as accounting software that you would install on your computer, except it runs on hosted servers and you access it using a web browser or app. Your data is thus stored and processed ‘in the cloud’. Cloud accounting can carry with it a host of benefits to business owners, stakeholders and advisors, including: • Real-time • Reduced Data Entry • Intelligent Software • No More Filing • Automatic Back-ups • One Version • Mobility & Flexibility In the Australian market, most of the major software vendors have cloud accounting offerings. My preferred platform is Xero. We have a great summary of the benefits of Xero on our website at www.ptpartners.net.au/xero 5. Surround Yourself with Good Advisors Being new to business is not for the faint-hearted. It can be a lonely and incredibly daunting space. You need to pick a good team and that includes professional advisors who understand your mission and passion, and want to take the journey with you. Regardless of the space that they operate in – whether it be accounting, legal, financial services or any other – the aim should be to choose advisors who are as much your partners in business as they are your supplier of services. Sometimes it will take a while to settle on the right ones, but you’ll know when the time arrives. Darren Hagarty is a Director of PT Partners. 112 Pindara Magazine 2015\2016
Pindara Private Hospital Magazine - Issue Six
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