Need Solid Advice Regarding Business Registration

[dwglobal]

Hi Guys and Yaro,

Good day. Hope you're doing fine. I've tried to comment on your blog in a particular topic regarding starting your own business but I've got an error and as I clicked the submit button, it just went blank so I decided to just send you a private message since I just really need a solid advice from someone who also lives in same country (Australia).

Anyway, I'm planning to start my own online business to support my income from my full time job and eventually do this online business full time.

I've just got a couple of questions for you. Since you're also from Australia like me (Sydney here), I was wondering if you can give me some solid advice in registering for an ABN. Which type of biz should I register? a sole proprietorship or an LLC? I'm doing an online publishing and affiliate marketing so I believe you can relate and knows what should I take into considerations in registering for an ABN.

I'd appreciate your response and looking forward to more of your great articles on your blog. Thanks in advance.

All the best,
Danny

P.S. I'd appreciate any input from the members as well who are knowledgeable about this matter. Thanks in advance.

[Evan]

There are increasingly fewer protections for company directors, though still some, compared with being a sole proprietor. A sole proprietor can lose everything.

The costs for having the company's books done is considerable - say $1K. If you do your own as a sole proprietor you don't have to pay anyone anything. Depending on your income this may be a big expense, especially at first.

At the moment, depending on your level of income the tax department may consider it a hobby rather than a business. The ATO, once you've got through the phone queue, I have always found willing to explain their rules. (If you wish advice or to understand the meaning of the rules they are worse than useless.) They will send you stuff on how to assess if your business is currently a business or a hobby.

These are some of the things you will need to take into account. Hope it helps.

[Yaro]

Hi Danny,

Which type of biz should I register? a sole proprietorship or an LLC?

That's not a question I can answer for you since you need to speak to your accountant and see which suits your current financial situation.

I started as a sole proprietor, but in most cases it's better to go with a company for asset protection. However a lot hinges on how much you expect to make since if you are just starting the tax breaks as a sole proprietor are better, then as you earn more a company becomes better.

If you have no assets and very limited funds, go a sole proprietor, if you can afford the company rego fee of around $1k and have a house or car or other assets, then go company.

But really, you should speak to an accountant and it's worth having an accountant available anyway, so why not form that relationship now.

[dwglobal]

Thanks for the input. Yeah I understand from what Joel Comm explained on his free report that you can lose everything as a sole proprietor if something wrong happened to your biz but if you want asset protection and separate your personal asset from the biz, an LLC is the way to go. (It's apparently in US law).

In regards to my current situation, I don't have that kind of money to pay for that $1k fee and personal assets too like house, land, etc. I'm not earning that big too from my online activities since I've just started. If the ATO treats this as a hobby at the moment, do I still need to pay taxes for my online earnings? Can I just keep what I'm doing right now and don't register an ABN until I start earning good income from the internet? Is there any specific amount of income I should earn before I consider registering as a sole proprietor? Lastly, is it OK to register as a sole proprietor while I'm also working full time (my current job)?

I'd appreciate any input. And yeah of course I need to consult an accountant and it's just that I need some ideas before I do this and learn what to tell or any questions I need to ask them.

Thanks in advance,
Danny

[Carlos SEO]

Well, see, LLC is comprised of partners. Now, read that again: Plural partner.

Or a network of companies.

Companies can be partners and not be a LLC, too. But the thing about LLC is that you and the partners are the founders of the company. LLC's get as much trouble as Sole Proprietors do, its worse because your partners can royally screw you, and place the blame on you. But then again, it can backfire on them because they'll get their own liability.

While this is true, LLC's have limited "perks" when it comes to lawsuits.

Corporations are slow, but are strong against lawsuits.