Business or company - how to chose?

Hi Everyone,

My DH has decided he wants to be his own boss. He has been offered work as a consultant but we're not sure if we should set up a company or business. Does anyone have any comments? I've told him to go talk to an account/financial advisor. Also, if you have your own business/company - how do you pay yourself? DH is the main earner in our family and I don't want to put us at unneccessary risk...

Thanks!

MG

We have a company set-up, this was mainly due to the requirement of DH's contract when we first set-up the business. I am glad that we have set it up that even, even though there was a high set u cost and some on going costs. A company submits its own tax return seperate to your own. I like the fact the business is separate from us, that all the income is not "ours".

DH was paid as an employee of the business, so we had to pay workcover and superannuation. Tax was also deducted each pay as well and he received a payment summary. It is good to know at the end of the year that some super has been put away and all the tax paid. Whereas as a sole trader it would have been too easy to have not put away for his own super or put money away for tax.

Now the business has changed, DH has moved on and now I am the employee. At the moment I am not drawing a wage as the company owes us money that we loaned it. It works for us as I am able to split the money I receive between loan repayments and declarable income at the end of the year, so I can estimate correctly for FTB etc. Once the loan is fully repaid of course any money paid to me will be wages, but I will at least be able to set the amount going to me and the rest will be profit to the business (the business of course will pay its own tax on any profit).

I have discussed all this with our accountant and it works for us and may not work for others. So definitely talk to your accountant about the best set up for your situation. I know from when I was in finance and payroll we preferred any contractor to be company as when it came to super, workcover, payroll tax requirements the obligations were clearer. Whereas when dealing with a sole trader it was often difficult to work out if we had those obligations. Hope I made sense with this, it can be hard to keep the infomation brief.

Thanks Astrid. I used to set up companies but it's a lot different when it's you in the seat! I have told DH not to sign ANYTHING until he gets professional advice. Turns out the guy who was wanting to hire him as a consultant may now have full time work for him instead which will suits us better as I'm not sure how DH will manage to take holidays and time for his Army committments as well! It's so hard!
A HUGE Thanks Astrid for your input.

MG

I do have one question for you. Is you husband going to be consulting to one firm only or to many? If he is only working for one, then it may not be worth the hassle to start a business and deal with the ongoing paperwork.

He is already doing work for one company and is in talks with a second and possible third. So I guess multiple. I agree about all the paperwork and hassel...