Sole trader, limited liability company or what?

[marty]

I'm currently in the situation of using my skills to provide services to people, services that people/businesses pay pretty good money for. At the moment I am simply employed part time in the role - paying PAYE, but am paying some ridiculous tax - all secondary. On top of that I have considerable expenses for training and upskilling - I have to pay for many of those out of my own pocket.

I am looking at ways of off-setting some of those costs, maximising the paying back of loans associated with my qualifications, yet still retaining some income from my services.

i do not intend employing anyone else at this time, and can't see that happening in the future.

Please - any small business/sole traders for some advice? By PM is fine.

[cowpoos]

I'm currently in the situation of using my skills to provide services to people, services that people/businesses pay pretty good money for. At the moment I am simply employed part time in the role - paying PAYE, but am paying some ridiculous tax - all secondary. On top of that I have considerable expenses for training and upskilling - I have to pay for many of those out of my own pocket.

I am looking at ways of off-setting some of those costs, maximising the paying back of loans associated with my qualifications, yet still retaining some income from my services.

i do not intend employing anyone else at this time, and can't see that happening in the future.

Please - any small business/sole traders for some advice? By PM is fine.
This sort of thing is quite circumstantial...to get the best possible answer from people on here that actually know [of which I suggest there will be fuck all] ....you will have to reveal a fair bit more info than what you have...

Free advice when it comes to business is to always be taken with a grain or three...Talk to a accountant...it will be worth it in the long run!! a good one will pay for himself!

[marty]

yeah i know. at least i'm not asking about filtering. or getting off tickets.

[cowpoos]

yeah i know. at least i'm not asking about filtering. or getting off tickets.
true!! or about the 4x4 driver that almost cut you off while pulling into KFC!!

[YellowDog]

The simplest answer will be to become a sole trader. You can use your IRD No. to enable you to charge and reclaim GST and you can offset all of your business expenses for working. Cash in hand is no good and you willneed to obtain invoices/receipts (even at teh bar) for everything you do with your profession.

As has already been said, you will need to appoint an accountant who will also be able to give you advise as to what percentage of your home power/telephone expenses you can also reclaim. The only sownsode is keeping track of it all. Your accountant will be able to advise you on the easiest way of doing this. I would personally trecommend Quickbooks as a great way to manage your business accounts. Your GST return will take you all of 3 seconds to produce.

Good luck.

[Ocean1]

The simplest answer will be to become a sole trader.

Yup. Unless the income is quite serious, then you need to consider other options.

And yes, talk to a good CA, ask around, the good ones aren't hard to find and unless you want to spend serious time studying the regulations yourself they'll save you money. Just never forget that you might pay 'em but they actually work for IRD.

Ask about shared home expenses, provisional tax and ACC levies in particular.

[blairh]

If it's just you, then it's much simpler to just go Sole Trader. If it's getting bigger and there's lots of liability (eg if it goes wrong you'll owe TONNES of money) then start a limited liability company.

[MadDuck]

Talk to a accountant...it will be worth it in the long run!! a good one will pay for himself!

Or herself. Alas I have to admit to agreeing with Mr Poos - and that hurts! Much more information is required before any reputable Accountant would offer advice.

[Subike]

Sol trader with the assistance of a good accountant and a business mentor,
dont be afraid to talk to the IRD about what you are doing,
From my own experiance the IRD talked more sence than a lot of other places.
If you have not done a small buisness management course then find time to do one, as well as a basic book keeping course if you dont already have those skills.
Be prepared to set aside time each week to keep everything in order.
Make sure you write a readable business plan on what you are doing and re-write it every few months as you learn, make sure that a person who knows nothing about your business could understand it.
Like Bank managers when you need to borrow that extra cash flow for what ever.
Investigate insurance covers especially public liability

[cowpoos]

Or herself. Alas I have to admit to agreeing with Mr Poos - and that hurts! Much more information is required before any reputable Accountant would offer advice.
and as an accountant by trade Mrs Madduck....Your advice would be orth its weight!!

Although I am surprised that there is a whole raft of sensible and logical suggestions coming forward.!!!

[Mully]

Marty,

This bloke - Dave, www.taxrat.co.nz - is a good accountant. And a biker too.

I think he does "No obligation" initial meetings

[sinned]

Don't base you future on ill informed opinion. Find a chartered accountant with a sound reputation and seek their advice on how to set up your business. It will cost you an hour or two at a cost of $300 to $800. Don't go for the cheapest quote - choose the one with the best reputation.
BTW: I am not an accountant - generally don't like them but value good advice.

[James Deuce]

Make sure you have at least $60k in hand for the second year of operation's provisional tax bill.

That's all I have to say about that.

[tri boy]

Sole trader, and buy liability insurance.

[Winston001]

For the moment sole trader is appropriate - unless there is significant risk of liability. Could you be sued for what you do? If so, set up a company.

If you are being employed at the moment, be careful you aren't breaching any employment terms - I'm assuming you'll leave your job and set up your own business. Are you hoping to grab your employers customers?

There are free business advice services - check the web or your phone book.

You should get an accountant who can guide you on legitimate deductions. Tracking money is important and in that sense, GST is actually a good thing. You are forced to work out your income and expenses bi-monthly so you have regular snap-shots of how you are doing.

[cowpoos]

Make sure you have at least $60k in hand for the second year of operation's provisional tax bill.

That's all I have to say about that.

Huh...based on what??? sorry....but that is very ill formed advice.
that sort of advice is completely and utterly circumstantial!!

[MadDuck]

and as an accountant by trade Ms Madduck....Your advice would be orth its weight!!!

I would not offer my advice in a professional capacity on here unless I had much more detail...

[James Deuce]

Huh...based on what??? sorry....but that is very ill formed advice.
that sort of advice is completely and utterly circumstantial!!
That was my bill.

It's not circumstantial thanks.

I was advised by my accountant to save 50% of my earnings for the first 12 months of operating a Sole Trader business for that reason. I still came up short when the tax man rolled around.

I'd be keen to find out if things have changed since then, as I'd like to give it another crack.

[Winston001]

I was advised by my accountant to save 50% of my earnings for the first 12 months of operating a Sole Trader business for that reason. I still came up short when the tax man rolled around.


Yeah not a bad rule of thumb - in our partnership we worked on 1/3 set aside and fortunately there was always just enough if we drew on the overdraft too. We then had to get that repaid but over time it evened out. If self-employed people voluntarily paid PAYE it would be a lot easier.

[Ocean1]

I still came up short when the tax man rolled around.

Yeah. How to effectively torpedo any potential long term revenue generating start-up initiatives in one fell swoop.

Next week, how to double invoice your clients insurance premiums via ACC AND index the cost to their income.



Y'know, was a time when you paid tax in arrears. Such as it was. All of it, annually, including personal income tax.



*sigh*

[Big Dave]

I also endorse the taxrat as a good friend who knows his tax oats and is a man of the highest integrity.

[cowpoos]

That was my bill.

It's not circumstantial thanks.


So correct for your circumstances??

Not anyone elses?? just yours??

[YellowDog]

If it's just you, then it's much simpler to just go Sole Trader. If it's getting bigger and there's lots of liability (eg if it goes wrong you'll owe TONNES of money) then start a limited liability company.
Good point here. Make sure you get the best indemity insurance around.

[Mully]

I also endorse the taxrat as a good friend who knows his tax oats and is a man of the highest integrity.

And not cos his name's Dave??

[Big Dave]

And not cos his name's Dave??

I knew there was a reason. Thanks. :doh:

[James Deuce]

So correct for your circumstances??

Not anyone elses?? just yours??

Any self employed contractor.

My story is repeated around a large circle of my IT aquantainces, some better prepared than me and some worse, to deal with the repurcussions of success. It's not circumstantial, it's one of the pitfalls to prepare for.

If you have advice on how Sole Traders can avoid Provisional Tax bills, then let me know. My accountant was a bit stuck for advice at the time. It's why I'm PAYE now. Mind you I still getting nailed by IRD.

Yeah. How to effectively torpedo any potential long term revenue generating start-up initiatives in one fell swoop.



Tell me about it. Startup costs were reasonably steep too, but if felt like I was doing well at the time.

[Ixion]

So correct for your circumstances??

Not anyone elses?? just yours??

Most people actually. It's the way the system works

When you come off PAYE onto self employed, the first year (or part year) you don't pay any tax through the year. (Cos it's not being deducted each month , as it was when you were an employee). So you get to the end of the year , and feel you're really rich. Then, just as you're about to order another dozen cases of champagne, you open the tax bill, demanding a whole years tax all at once.

And , moreover, as the tax department has now figured out that you're self employed, henceforth you'll have to pay provisional tax. Which is payable in three installments, the first due immediately (if not before).

So, taking some vaguely reasonable figures :

If your income for the first year was , say, 60k ish, then come reckoning up time , you'll get hit with a bill for around 20k (not quite right but I can't be arsed working it out). PLUS - at the same time, a bill for the first installment of provisional tax on NEXT years income (Yep, you have to pay the tax on LAST year , and on NEXT year at the same time). If you estimate next years income to be , say , 100 K (let's be optimistic here), that's around 30K ish in tax. One third for the first installment is 10 K.

So, the tax department want a total of 30K. But, at this point the only money you've actually had come in is that first years 60 K . 30 K tax bill, income of 60 K , yep, 50%.

It's going to be about that, roughly, unless your annual income is WAY small, or way large. Just the way the system works. Can be a tad painful, but, if you're not expecting it. All evens out in the end of course. If the change from employed to self employed happened at the end of a tax year, it's not such a hit.

[Ocean1]

how Sole Traders can avoid Provisional Tax

A) Refrain from making a (visible) profit at all.

B) Grow so fast you're always ahead of the tax wave.

C) Fuck off overseas.

[boomer]

Become a ltd company and see an accountant.. BDS accountants (http://www.taxmaster.co.nz/) are good. They'll talk and walk you through the best/cheapest/more profitable options for you...


I'm a self employed contractor and have my own business doing so.

[Noidy]

My accountant advised to go the limited liability company path as it is easier to "distribute" profits to shareholders (me and my wife) to change the way the tax is taken i.e. paying personal tax rates as opposed to company tax rates. I take drawings as opposed to a wage and he does the adjusting. My earnings last year were calculated at about 1/3 of my drawings. Next to no tax and ACC was 5/8 of FA. Dont ask me how he does it or what he does, thats what I pay him for. Find an accountant who has other business interests. He is also looking for all the "edges" he can find for himself and will pass on these to you

I agree with Ocean1 (havent made it overseas yet)

[boomer]

That was my bill.

It's not circumstantial thanks.

I was advised by my accountant to save 50% of my earnings for the first 12 months of operating a Sole Trader business for that reason. I still came up short when the tax man rolled around.

I'd be keen to find out if things have changed since then, as I'd like to give it another crack.


i'd get a new accountant bro.. i save 40% of all incoming monies; for tax and gst.

End of year comes and i got a substantial refund on both.

[James Deuce]

i'd get a new accountant bro.. i save 40% of all incoming monies; for tax and gst.

End of year comes and i got a substantial refund on both.

10 years ago man. I can't be bothered trying again. PAYE, grey cardigans, and an early grave for me.

[boomer]

That was my bill.

It's not circumstantial thanks.

I was advised by my accountant to save 50% of my earnings for the first 12 months of operating a Sole Trader business for that reason. I still came up short when the tax man rolled around.

I'd be keen to find out if things have changed since then, as I'd like to give it another crack.


10 years ago man. I can't be bothered trying again. PAYE, grey cardigans, and an early grave for me.

im with u on an early grave, not so sure on the slippers tho...!

[James Deuce]

Dammit, I've lost my reading glasses AND my pipe.

[crazyhorse]

You don't get rich working for someone else - and yes, Liability insurance is a must.

[Patch]

Reading some of the bullshit advice given - its no wonder some small businesses fail

That said there are a couple posts with very good advice but they are the minority.