I had the best time last month.

I met with 5 amazing business owners.

These incredible humans took me up on our January offer of a free business structure review.

We had some good chats about where they were at in their businesses, what their plans were for the year, projected revenue for the 2023 financial year and then considered potential risks to their businesses.

Time well spent working on their business.

Some common themes were:

• When should a sole trader move to a company or trust structure?
• What is the impact of the change?
• What are the costs of the change?
• Supporting and managing teams – contractors and employees
• What are the risks in your business? What are you risking?

I always get such a kick out of being invited into someone’s business. I find it extremely fascinating to learn how their business works, what their challenges are and it makes my problem solving heart sing if there is something I can support them with or lend my experience to help.

I think a problem shared is a problem halved.

Should you move from a sole trader to a company or trust?

I really strongly believe that it’s important that we don’t work in silos.

I’ve written a whole blog on it actually – How to make your business more successful : the Golden Triangle. The sweet spot in business when your accountant, lawyer & banker work together for you.

Given the common theme of “When should I move to a corporate structure” I reached out to our network to get a financial perspective on this too.

Here’s what Vanessa from TaxChic had to say:

There isn’t any real firm trigger point to be honest, we look at it on a case by case basis, but broadly there is two primary reasons we’d re-structure from a sole trader to something else:

1. Risk, a big driving factor but I’m sure you have this covered. [Yes we do!]
2. Tax savings, if you’re earning over $180k you’d certainly consider it. 

But keep in mind, restructure to company often means, yes you’re paying less tax but you don’t get the same flexibility of a sole trader and you can’t have all the cash.  It becomes company cash and unless you pay tax on the cash you’re withdrawing from the company, you can’t just take it out without consequences. 

So, sometimes in that scenario, you’re really only deferring tax to a later date and the pro and cons really need to be worked through with the client to make sure it is in line with their goals and objectives.

I find most of the time Nic, yes tax benefits are a key deciding factor but often it is the protection of assets and risk mitigation that is foremost in the decision making for restructure.

Case by case though of course! 😊

Action Triggers

I completely agree. Here’s the triggers that I think mean, you need to start some collaborative conversations with your legal and financial advisers:

• There are significant risks in your business e.g. potential for employee, contractors, customer or other claims, like workplace health & safety

• You are building wealth in your own name that you want to protect for your VIPs

• You are starting to earn significant income!

• You need to be a corporate structure to access funding, grants, tax incentives, to satisfy pre-qualification or tender requirements

• You want to build a business that you can pass onto someone else one day – this could be your VIPs, a key employee or a purchaser

• You have other risks elsewhere in your life that you want to separate your business from

Next steps

If this is you and you’d like to start a conversation with me here’s the best way to book in some time with me.

FREE15 minute Biz Chat – booking link

Ready to get to work?

30MIN Biz Chat with Nicky – booking link