The thought of starting your own business is exciting. However, you will need to sacrifice a lot of effort and time to ensure it is successful. One element that you will need to pay attention to is business tax. However, most small business owners are not keen on learning the proper way to handle their taxes and tax returns. For that reason, they often get into trouble with the Australian Taxation Office (ATO).
The best way to avoid such problems is by learning more about business taxes. You can do this by discussing and strategising with an experienced tax accountant. Here are three crucial questions your tax accountant will help you answer.
1. Which Business Structure Is Best for You?
Deciding on your business structure should be the first thing you do before the business starts making money. Usually, the business structure determines your tax percentage, your level of control over the investment, as well as your personal liability. The most basic structure you can develop is a sole trader business. With this business setup, you control and manage everything. That means the company is taxed as an individual, whereby you pay tax depending on the profits acquired.
Other business structures include a partnership, a private company and a trust. It is vital to find out each structure's financial and tax obligations to choose the most suitable one.
2. What Is the Next Step after Choosing a Business Structure?
After picking a business structure, you'll need to hire a legal expert. They will help you prepare all the necessary legal documents required for your business. For instance, running a trust requires a deed. Getting all the documents needed to establish the business is easier when working with expert tax accountants and lawyers.
3. How Can You Separate Your Personal Finances and Business?
You must create a clear distinction between your business and personal finances to avoid confusion when filing taxes and overpaying your taxes. That means opening a different bank account for your business. You will then have to use an income statement and balance sheet to track your business finances. Whenever you spend your money to cover business expenses, it is crucial to account for them if you wish to get tax deductions.
Handling taxes for your small business can be easier than you think. You only need to have a proper financial strategy for the company, and you're certain to get maximum returns for your taxes. The best way to achieve that is by working with a tax accounting specialist right from the planning stage. Reach out to a tax accountant in your area to get started.
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