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The Pros & Cons Of A Partnership As A Business Structure

If you’re looking to go into business with someone, the chances are that you might be looking at using a business structure known as a partnership. A partnership is a type of business structure that is made up of two or more people who distribute income or losses between themselves and is a fairly popular form of structure amongst those looking to develop a business.

It offers ease and flexibility to run your business as individuals, eliminates the need to create a company structure and avoid reporting obligations. You’re also not going into creating a business by yourself, which can be an added bonus for some and reduces some of the initial financial burden and uncertainty of the setup.

Just as there are advantages to choosing to set up a partnership, one must also examine the disadvantages.

A partnership generally exists between two or more parties, so disagreements in management may occur, and decision-making may never be truly equal. It can be difficult to add or remove partners into and out of the partnership, and adding more partners can make the partnership more complex to manage.

Partnerships also generally do not receive access to many government grants (barring special exemptions).

A partnership business structure may be the structure for you to employ as they possess the following key elements:

There are three main types of partnerships that you may have come across in your own research. Each one has advantages and disadvantages that you may want to take into account when considering what would be the best suited to your situation.

A general partnership is where all partners are equally responsible for the management of the business. For any debts and obligations that may be incurred by the business, each partner has unlimited liability for them.

A limited partnership is made up of general partners whose liability is limited to the amount of money that they have contributed to the partnership. Those involved in this style of partnership are known as limited partners who are usually passive investors without a role to play in the day-to-day management and running of the business.

An incorporated limited partnership is where the partners involved in this type of partnership can have limited liability, but at least one general partner must have unlimited liability. If the business cannot meet its obligations, that general partner (or partners) become personally liable for the shortfall and debts.

Each state and territory has different legislation and regulations that must be abided by when setting up a partnership. Learn what is legally required from you prior to setting up your partnership, or discuss with us what you may be obligated to do.

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Capital Gains Tax Can Be Tricky – That’s Why We’re Here To Help

September 13, 2021

If you have disposed of any assets (which can include the loss, destruction or sale of an asset) which are subject to capital gains tax, you need to let us know as soon as possible. These are known as capital gains events, which can affect the way in which a capital gain or loss is calculated, and when it is included in a net capital gain or loss.

The type of CGT event that applies to your situation may affect the time of the CGT event’s occurrence, and exactly how to calculate your capital gain or loss. As mentioned earlier, a CGT event can involve the loss of an asset, the destruction of an asset or the sale of an asset.

The Sale Of An Asset

If there is a contract of sale, the CGT event happens when you enter into the contract.

A common CGT asset involved with contracts of sale that is often sold is the house. The CGT event, in that case, happens on the date of the contract, not on the date of settlement.

If there is no contract of sale, the CGT event is usually when you stop being the asset’s owner.

Your capital gain or loss for the assets is usually the selling price, less the original cost and certain other costs associated with acquiring, holding and disposing of the asset.

Loss Or Destruction Of An Asset

If a CGT asset that you own is lost, stolen or destroyed, then the CGT event happens when you first receive compensation for the loss, theft or destruction.  In this way, the capital gain for such an asset is the amount of compensation less the asset’s original cost. If you do not receive compensation for the asset, the CGT event happens when the loss is discovered or the destruction occurred. Replacing the asset may result in being able to defer (or “roll over”) the capital gain until another CGT event occurs (e.g. selling the replacement asset).

The best way to ensure that you are doing the right thing when it comes to CGT tax is to keep your records up to date. This will assist us in ensuring that you are remaining compliant Any CGT events that have occurred need to be recorded (including asset disposals for at least five years after the event occurred. The best way to ensure this is to keep track of:

Keeping accurate and well-maintained records for CGT events is of utmost importance, as it allows us to ensure that you are accurately reporting your transactions and lodging your return correctly. If they incur any net capital losses, this needs to be reflected in the return as they may be able to offset these against capital gains in a later year. Once a loss has been offset against a capital gain, you need to keep the records about that CGT event for two years (for individuals and small businesses) or four years (for other taxpayers).

If you are in the process of disposing of a capital gains asset, you will want to be certain that you are doing the right thing. Capital gains tax can be a tricky issue, with plenty of rigamarole. Come speak with us to ensure that your returns are lodged with the most accurate and correct information needed for submission.