Cheapest Way to Create New Company

WiseMan on 04/11/2021 - 13:49

Hi All,

I am working full time on TFN and on ABN on the weekend. Last time I visited my TAX agent, he said its better to create a company and do weekend job under company name as tax rate will be less. He quoted $800-900 charges to create a company. I came across below website which quotes $516 (inc. govt fees)

https://lawpath.com.au/register-company

Please suggest what are the steps I need to follow to create company myself online and if there will be any additional charges as well besides $516 .Also, if there are any better options.

Financial

Comments

  • 87percent on 04/11/2021 - 13:58
    +1

    should you really be cheaping out on something like this??

    • mskeggs on 04/11/2021 - 14:28
      +9

      Poor advice. It is just a regulatory form.
      You can pay the online guys who churn out hundreds a few dollars over the ASIC fee, or get an accountant to do it for you for $200 more.

      It is like paying for the more expensive PPSR when buying a car - all are the same item.

      OP has already paid for the advice, so paying a second time makes no sense.

      • plmko on 04/11/2021 - 15:17
        -1

        It's really not but OK, I've seen people screw themselves over on a few details. It's one of those you're fine if you're fine until it's not.

        But OP seems like he knows what needs to be done so whatever.

        • mskeggs on 04/11/2021 - 15:49
          +5

          I mean, I could agree with this if setting up a trust or SMSF, but using shelf companies has been absolutely routine as long as I have been alive.
          What might OP want to consider when forming a company to act as the entity for some weekend contracting?

          • iCandy on 05/11/2021 - 08:07

            @mskeggs: I used to set up companies and trusts as part of my job. The software ASIC uses is terrible. Looks basic and is very hard to understand and even harder to use. There are a lot of forms generated and copies are put into folders for the company owner, as well as advice in a letter about the forms. The originals are lodged with ASIC and a fee paid for the company to be registered. The $500 odd fee is a great price if that business has a good reputation. I would take that option.

  • bemybubble on 04/11/2021 - 14:01
    +3

    Can I suggest using whatever your tax agent recommends. The company constitution is a legal document and if the one you choose has wording gaps you might end up paying in the long run…

    Food for thought though - investigate a discretionary trust with a corporate trustee to run a business. You'll find a lot more flexibility IMO…

    • mskeggs on 04/11/2021 - 14:34
      +3

      And double the annual admin costs, and we don't know OP's situation with regard to low income beneficiaries, maybe none.
      Worth considering but you would figure the tax agent would be able to give some level of recommendation in this regard or why would you trust their advice to form a company?

    • davidg444 on 05/11/2021 - 14:53
      +10

      Good point. I am a lawyer with my own practice doing business, company and tax work, and I am an OzBargainer who appreciates value for money! Here a few things to ponder:

      Proprietary company setups are not all the same. The $512 ASIC registration fee doesn't get you a constitution which is a legal document, as bemybubble says, for your company. Company constitutions vary and are on a quality spectrum and quality can count just like with any product.

      A company set up without a constitution gets a one size fits call called the replaceable rules which gives a bare bones way for the company, and those involved in it, to operate. One size fits all can lead to a unintended outcomes. For instance an often unforeseen, easy to trip, requirement is to notify other directors of a conflict of interest between a director and the company. A properly tailored company constitution can modify conflict of interest rules away from the one size fits all to suit a company where only mum and dad or close family are directors. Failure to do this can get weaponised like, say, when directors get divorced. And don’t think that this is the only reason why the replaceable rules may be a poor fit for your company.

      I do work sorting out situations made worse because companies are not understood by those setting them up. A company’s ideal capital structure is a big issue when a company is acting in its own right and not a trustee. Unless you or your accountant follow s112-20 of the ITAA 1997 on the issue of shares in the company you’re a big chance to pay more capital gains tax that you might have when you sell or exit out of a company that has grown.

      Company capital structure fails can lead to unnecessary loss of small business CGT concessions for small business which can amount to a big economic cost where a company ends up being a good business.

      Shareholders try to get “their” money out of a company following a poorly executed lawyer free setup is another world of grief which can ironically bring in the lawyers, the ATO and expensive insolvency specialists.

      Lots of problems don’t show up until a shareholder dies. This is often when the problem comes to my desk. It is sad when a grieving family is tied in knots because their company establishment going way back was stuffed up. Any company setup, whichever way, might seem the same through times of smooth sailing. Why bother with the pesky paperwork at all? Wait, too, until the shareholders divorce, a fight amongst shareholder ensues or there is trading or tax trouble with the company. A sudden turn of interest then in the company’s capital, structure and records.

      Most of the non-legal providers on the internet are suss. They are derived from the offshore tax haven shell company “professional services” industry or use their business model. ICIJ media gives you an idea of their ethics and how they help their customers deal with local rules and commitments (not). Their model is to hide and escape from them.

      Company constitutions, trust and SMSF deeds and partnership agreements are legal documents, and these providers are there to help you escape from having to get them from a lawyer charging a fee who is ethically obliged to professionally prepare them and whose work is covered by a professional indemnity/negligence insurance to protect you. And what about these rights? What a solicitor must tell you https://go.ly/P0jLU Worth having?

      Their model is often something like this: we are not lawyers, so we give you escape from lawyers with this service. But we offer documents which are (based on) documents authored by a lawyer.

      However you take this double-think pitch on the merits of avoiding lawyers, a reality is that the model is illegal: see the Federal Court case of Australian Competition & Consumer Commission v. Murray [2002] FCA 1252 https://jade.io/article/106192 to get a grip on this type of unqualified legal practice.

      There is a misconception that lawyers in this space are not worth the fees. I, for one, reckon my operation is lean and mean in the best of OzBargain traditions. And there are others like me. Sure my company and trust setup services cost a little more because my setups involve me thinking about and taking responsibility for what I am asked to do, and guiding clients on their setup choices based on what I know about them and thirty-five years’ experience of the ever changing traps – and that can’t be done by AI, yet.

      So I can’t “compete” with a no think no guidance no responsibility service which gives you a company or trust setup from a sausage cutter: documents all done and delivered instantaneously, with your credit card charged just as fast. But you get my drift: this blindingly impressive service just may be just too fast and seemingly hastle-free. Look at the providers' website fine print about who takes responsibility for loss if anything, including data inputs for which the inputter is made fully responsible, turn out not quite right. Hello accountants!

      So I agree. It might be better to go to a dentist rather than the cheapest guy with a drill.

      • Slippage on 05/11/2021 - 19:01
        +1

        If there was an award for the best advice given, here is the winner!

      • pndl on 05/11/2021 - 21:39

        This all sounds very good, though you must be exception to the rule. The decent lawyers who care about anything you just wrote work at big 6 law firms charging out a thousand an hour. The typical suburban lawyer opening small Pty Ltd companies is going to get their unpaid intern to fill out a precedent, don't even talk about looking up case law.

        • Ayanami on 06/11/2021 - 20:16
          +1

          I'd moderate what you've said by adding "most of" the decent lawyers etc etc. I like, davidg444, run a small practice and all of us there take great pride in doing high quality work and not being voracious billers. I've worked in one of the sky prisons and suffice to say the culture did not suit, so I left as soon as the opportunity allowed.

          There aren't many of us out there, but we are there.

          • pndl on 07/11/2021 - 18:43

            @Ayanami: Yes, I did mean it hyperbolically.

      • Ayanami on 06/11/2021 - 20:27

        Where's the super upvote button? Succinctly and eloquently put.

    • HeWhoKnows on 05/11/2021 - 19:10
      +1

      Obviously nobody here has done this before.

      You just buy a ready made shelf company with a constitution for $600 to $700 and change the company name to whatever you like and make yourself the director

      here are a couple of links:
      https://www.shelfcompany.com.au/fees-and-pricing/
      https://www.ecompanies.com.au/

      Job done
      end of discussion my friends

  • Kaz0551 on 04/11/2021 - 14:02
    +1

    They're all about the same price for shelf cos https://www.ecompanies.com.au/

  • Jimothy Wongingtons on 04/11/2021 - 14:08
    +1

    you can claim the costs of creating the company and associated affairs can't you? I'd prob just go w/ tax agent, I mean hes managing the rest of your stuff anyway?

    • Zeph101 on 04/11/2021 - 14:37
      +1

      Can't claim the costs of creating the company as an initial tax deduction as there is no entity that can claim them.

      Instead they are brought in as formation costs and are written off over a period of 5 years.

      • Jimothy Wongingtons on 04/11/2021 - 15:09

        That's what I meant sorry - if going to the effort/cost of setting up a company you'd assume hes in it for mid-long term…

  • No Username on 04/11/2021 - 14:13
    +9

    DIY $512. Easy to follow step by step process https://business.gov.au/registrations/register-a-company
    Only gets hard if you have a complex share structure or want to deploy a custom constitution.

    • leiiv on 05/11/2021 - 01:36

      What kinds of benefits made possible by having a complex share structure or a custom constitution?

  • djkelly69 on 04/11/2021 - 14:14

    At least you have someone to blame/go after if your tax agent sets it up and there are issues later on.

    Also TAX is not an acronym, it is just a word.

  • Bartemaus on 04/11/2021 - 14:39
    +1

    Annual ASIC filing fees as an ongoing fee. Currently $276 but go up every year.

    Probably best to do at least a little research into companies before going down that path? FYI, no lasting tax benefit if you intend on taking the profits out of the company and using them personally.

  • Peza on 04/11/2021 - 14:53
    +6

    As many mentioned above, do your research… understand the flow of the money.. that is crucial

    If your company earns money, it is the company's money.. The company then needs to pay you.. so your tax assessment wont change much, but you will have more administration. For example, if the company pay's you a wage, then there will be company PAYG reporting, super etc.. if you aren't doing that yourself, then it will cost you more again (on top of the annual fee, keeping bank accounts etc)

    You might also need to looking into 'personal services income' is applicable
    https://www.ato.gov.au/Business/Personal-services-income/

    As others also said, having trust could work, but its all about how much money you are earning to crunch the numbers

    Good luck and hope the responses provided so far help

    • eek on 04/11/2021 - 15:35
      -1

      But the rub is then EVERYTHING then becomes a company expense. You then have your company lease your cars, running expenses, phone, groceries, IT equipment, and almost whatever you want can now become a "company expense". Keep all earnings and expenses within the 'company', minimize how much you pay yourself through the company to optimise your overall tax position.

      • trex on 04/11/2021 - 15:55
        +6

        Wrong. Car and running expenses, groceries etc are personal related expenses. By having the company pay this, it would fall under the umbrella of Fringe Benefit Tax.

        As the expenses is not incurred wholly and exclusively to generate income, such personal expenses may also be disallowed as deductible expenses when calculating the company's income tax.

        • eek on 04/11/2021 - 16:16
          +2

          You are correct, and in theory, yes, people should declare their personal use component, but nobody really does it - even if they are being used to ferry kids to and from school or weekend holidays. It's just human nature. Go and ask the guy in the shiny new Hilux at the beach, with the lift kit, winch, ECU tune, aftermarket exhaust etc. I bet all modifications to the car were company expenses and the car is declared 100% for business use only. Not even that - look at their family's mobile phone plans and phones. I bet all of them are purchased under the business 'for business use' only.

          Opening and running a business isn't always about making more money if you already have a full time job and another income. It can be there to optimise your tax position as mentioned above. Income from the PAYG employee component is the real killer where you're severely limited on what you can do to reduce your taxable income.

          • trex on 04/11/2021 - 16:22
            +4

            @eek: Theory becomes reality when ATO comes knocking to do a tax audit.

            Difference between tax planning and tax avoidance is that one is a crime.

            • kiitos on 05/11/2021 - 16:50
              +2

              @trex: I thought tax avoidance is legal, it's tax evasion that isn't.

              • rektrading on 05/11/2021 - 16:57

                @kiitos: Tax evasion is a crime.

                Tax avoidance is legal and should be used by everyone.

                Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.
                https://commonslibrary.parliament.uk/research-briefings/cbp-…

              • trex on 05/11/2021 - 18:27

                @kiitos: You're right :) I had the term mixed up, should be tax evasion.

      • freefall101 on 04/11/2021 - 16:08
        +7

        This is absolutely not allowed. People do it all the time, but if they get audited they're done.

  • freefall101 on 04/11/2021 - 16:13
    +1

    I can't see how that would make a scrap of sense for a side gig. Yes, the tax would be less at 27.5% but there's the company filing fees plus you can't take the money out of the company and spend it yourself, you'd pay a dividend and be taxed as per normal anyway or you have to leave the cash in the business (and if you have that much and some family, the trust is a good idea. Personally I'd just load it up into super if you're not going to touch it though).

    It must be one hell of an earner for a weekend side gig to even consider it.

    • Crow K on 04/11/2021 - 16:53
      +1

      Maybe the side gig has a higher risk profile and doing it through a company will protect the individual's assets. There's a lot of reasons to use (or not use) a company.

      Having to pay a (deductible) $273 or so a year would not be a big factor in those decisions.

      • Kenb0 on 04/11/2021 - 18:03
        +3

        That's perfectly fine if that's the primary reason why they're doing it through a company, but thats not the reason why their tax agent is recommending working through a company

        he said its better to create a company and do weekend job under company name as tax rate will be less

        while technically true as the company tax rate is likely to be lower than their marginal tax rate, if need to actually pull money out of the company for personal expenses, the tax rate would end up being the same as individual tax rate anyway

        • Crow K on 04/11/2021 - 19:58

          There's a variety of reasons, like I said.

          And sure, if the person working their regular five day a week job needed to pull money out of their weekend side hustle, those considerations would apply (but only on the amounts they actually pull out).

          In the absence of that (let's assume they can live off their regular job fairly comfortably) there are a variety of benefits from having a company, including having the side hustle income be on a lower tax rate.

    • rektrading on 04/11/2021 - 18:47
      +1

      PTY LTD is a get out of jail card.

    • lovebargains123 on 05/11/2021 - 08:09

      27.5%?

  • bemybubble on 04/11/2021 - 16:49
    +2

    I can't see how that would make a scrap of sense for a side gig

    Asset protection

  • netjock on 04/11/2021 - 20:19
    +1

    I am working full time on TFN and on ABN on the weekend.

    Depends on what tax bracket you are on. The average tax rate is 30% up to $100k. If you are working on weekends. Making an extra $20k a year on 30% tax rate vs company tax rate of 25% then you are saving a whooping $1k. A quarter of that is ASIC review fees, then it depends on how much your accountant charges for company tax returns (probably $1k) you're just feeding the accountants.

    • trex on 04/11/2021 - 20:27

      Yeap. GST threshold is $75,000. Quarterly BAS adds up to the cost.

  • funnysht on 04/11/2021 - 20:59

    out of curiosity can you set any losses from your company against income from different job

    • SlickMick on 05/11/2021 - 10:51

      no. All you can do is carry forward the loss

  • djones145 on 04/11/2021 - 22:38

    fly to Ireland and set up a company
    then fly to Bermuda and set up a captive
    funnel all monies through Ireland and the captive and u will be fine

    u said 800 to 900m right?

    this is what i do so I can by the amg Merc weekely

    • funnysht on 05/11/2021 - 12:06

      yeah and end up being pursued by the ATO, IRS, and FBI

      • HardQuiz on 05/11/2021 - 14:27

        Why only mention FBI and not AFP & ASIO ?

  • OzHunterNSW on 05/11/2021 - 09:57

    SLMUT, you received advice from the TA but feel it better to not AT but AU

  • CandyMan on 05/11/2021 - 13:56

    Buy a company instead
    A lot of people have companies that they don’t need anymore

  • rektrading on 05/11/2021 - 16:38

    INC a company allows the directors to convert cash reserves to intangible assets.

    These assets can appreciate but depending on the local tax law avoid being taxed. They can also go down in value which allows the company to write down their quarterly earnings and reduce taxes.

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