Thursday, 24 Jan 2019
Deciding on the structure of the business is a vital decision which should not be taken in haste. It has a plethora of implications as it determines the amount of tax to be paid, asset protection, accountability of the owner, paperwork for the organisation and much more. Entrepreneurs in Sydney usually start off as sole traders because they are getting into a business for the first time and have a small set-up that can be managed singlehandedly.
Also, it is a high-risk proposition, so it is difficult to find partners in Sydney. Thus the owner starts operating as a sole trader and takes on the complete legal responsibility of the organisation. It means that the owner cannot share the debts and losses with anyone else. Since it is the most cost-effective structure in Australia, most first-time business owners begin their journey with this. A professional bookkeeper in Sydney can help the owner to lodge individual tax returns as fewer reporting requirements are needed from a sole trader.
Over the course of a few years as the work expands and the organisation starts generating amplified revenue, it becomes imperative for the owner to reorganise the business structure with the help of bookkeepers in Sydney. They may add more partners or change the operational or legal attributes of the entity to accommodate the growing nature of the venture. The new financial year is a good time to get started as a company.
Bookkeepers in Sydney can help you take charge of the situation and get the business registered as a company. When you move from being a sole trader to a company, your reporting and bookkeeping requirements increase and the shareholders become the owners of the organisation. The directors become legally responsible for the debts of the company, which is regulated by the Australian Securities & Investments Commission (ASIC).
The directors need to report their income generated from the company as well as other sources in the income tax return which can be easily handled by a professional bookkeeper in Sydney. They also have to file a fringe benefit tax return if they are accepting fringe benefits which can become easier with the help of a bookkeeping company in Parramatta.
The transformation will be obvious as the organisation has to now comply with the Corporations Act 2011 and keep records of all the financial transactions and tax returns. Since all the bookkeepers in Sydney use XERO, leading online bookkeeping software for small businesses, the move needs to be made on the digital medium as well.
The advantages of using XERO include quick accounting solutions, control over the numbers, customised features, management of payroll and projects through apps, invoicing and customer relationship management. It keeps you updated at every moment with a real-time view of the cash-flow. Naturally, bookkeepers in Randwick leverage its features to get reliable financial data which is safe and protected.
Many a time, business owners take things in their own hands and try to manage the accounts using XERO without hiring a bookkeeper in Sydney. Now when they try to make a conversion on the software, they end up in the soup. Here is some information on what to avoid during this changeover.
Stay away from doing a superfluous job at handling the software. It means that simply changing the ABN to the new registered company in Sydney and shifting the organisation type to a ‘company’ from a ‘sole trader’ is a wrong move. This doesn’t work in the favour of the owner as even after the transition some amount of activity continues in the sole trader account. It could either be customers making a payment to the old account or suppliers debiting cash from the same.
Since ATO views sole trader and company as separate entities, these transactions will not be related. In case of a wrong deposit, you will have to make entries in both the data files to push the transaction into the correct entity while bookkeeping. Separate accounting data files make sure that there is no ambiguity. So a fair approach taken by the bookkeeping companies in Chatswood is to create a new XERO account as a ‘company’ using the establishment date of the organisation.
The next step is to open new bank accounts for the company and get all the data synced online. You can export and import contacts and accounts charts effortlessly on XERO with the help of your bookkeeper in Sydney. Now, an important way to avoid transactions from happening in the sole trader account is to inform everybody upfront about the transition and provide them with the account details.
Make sure to tell them that the sales invoices generated from the sole trader organisation should be paid in the sole trader account. A seasoned bookkeeper in Parramatta can efficiently handle this job.
In addition, your bookkeeper in Sydney will help you in clearing your old balance sheets when you were operating as a sole trader. In case you have cash in your sole trader account, it can be used as funding for the company. Plus, you need to transfer your assets and insurance policies to the company. The bookkeeper must continue to file all the business activity statements as a sole trader as well as a company if there is activity taking place in these organisations throughout the reporting phase.
While inching towards the completion of the process, your bookkeeper in Randwick will close the sole trader bank accounts. The bookkeeper will make sure to export all the CSVs and bank statements. This makes certain that no wrong transactions are made in the future. You can then downgrade this account to a ledger, which can be upgraded again at the end of the year. You can export the ledger into an excel sheet to be used as a backup.
This step-by-step procedure ensures that there is a clear differentiation between the two entities and both can have some kind of activity during the changeover without any confusion or hassles. A bookkeeper in Sydney comes handy in managing the process and the accounting software with efficiency as they are trained in its effective working and understand its features. While making the transition, it is vital to understand the costs and options and hire the best bookkeeping company in Sydney to guide you during the process to make it a smooth ride.
We are a family run bookkeeping business that has grown to include offices around Australia in Melbourne, Adelaide, Brisbane, Sydney and Canberra. We have been helping our clients grow since 2001. Being one of the leading Bookkeepers in Melbourne, we are offering free consultation to every new client.
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