In our role as accountants and advisors, we consistently provide guidance to families seeking to establish and maintain fair and equitable business affairs. The journey often begins with businesses adopting simple ownership structures, yet as they progress and expand, intricate challenges emerge, necessitating the delicate management of equity interests, tax considerations, and commercial risk.
The incorporation of additional family members into the ownership framework elevates the importance of achieving a delicate balance in areas
such as tax optimisation, risk mitigation, and ensuring equitable treatment. An inherent challenge lies in differentiating between roles in
ownership and management.
Ownership encompasses legal and beneficial aspects, entailing the sharing of profits and losses, assuming commercial risk, and contributing
to capital. Conversely, management roles involve elements like salaries and bonuses, contingent on factors such as experience and
responsibilities.
Maintaining clarity regarding equity positions emerges as a fundamental aspect of effective governance. Introducing periodic equity statements, delineating the inception and conclusion of equity positions, the distribution of profits, and deductions like drawings and taxes, serves to amplify transparency.
Complex ownership structures may find benefit in the establishment of distinct entities for each family member's equity interest.
Given the intricate nature of these considerations, periodic reassessment of your equity position emerges as a prudent and strategic investment for the upcoming year.
Reassessing your equity position is a wise investment for the year ahead.
It might seem like a clever strategy - moving surplus business cash into your personal mortgage offset account to save on home loan interest, then shifting it back to the company around tax time. But there’s a catch: the ATO sees this, and they’re not fans.
Running a small business has always been personal. Every sale, every setback, every sleepless night - it all comes back to the same person: the owner.
A staggering 93% of small business owners reported higher costs this year, while 64% saw profits fall. Taxes, wages, and insurance top the list of pressures, with taxes ranked as the number one cost by half of respondents of a recent report.
