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SOLE
TRADER
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PARTNERSHIP
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COMPANY
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Credibility
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Generally
has the highest perception of all.
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Money You Owe
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Liable for all money the business owes.
Liability is unlimited.
Personal assets can be seized to pay business debts.
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Unlimited liability also applies.
You are liable for your partners share of the debts, including
unpaid taxes relating to the partnership.
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Shareholders liability for debt is limited to the
amount paid for their shares in the first place. The personal assets of the directors can only be
touched if the company has been trading while insolvent.
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Start Up Procedures
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Cheapest form to organise- just advise IRD.
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Do not have to get a written partnership agreement,
but would be sensible to do so if partnership is not husband and
wife.
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Set up the company and register
it with the Companies Office. Annual Returns must be filed with the Companies
Office with annual fee.
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Financial Accounts
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Accounts Format not laid down by law.
No requirement to produce a Balance Sheet.
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Same as Sole Trader.
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More formal presentation required than Sole Trader
and Partnership.
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Getting Accounts Audited
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No requirement.
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No requirement.
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If public company on the sharemarket, have to be
audited.
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Rates of Tax
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Tax paid based on personal marginal income tax
rates on all income. This
may be lower or higher than 38c/ $
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Tax paid based after distribution of partnership
profit on personal marginal income tax rates on all income.
This may be lower or higher than 39c/ $.
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Company pays tax at 30c/ $ on profits after paying
of all costs including shareholder salaries.
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When you Pay Tax
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Company will have to pay Provisional Tax a year
earlier than individuals if certain income levels are met.
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What to do with Losses
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Set off Losses against future trading profits and
against other income in the year of the loss or the year after.
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Same as Sole Trader.
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Set off losses against future profits of the
company.
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Raising Money
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Options are fairly limited- to bank or other
individual.
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Same as sole trader plus may be able to find a new
partner to bring in capital.
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Same as sole trader plus raise funds from general
public plus venture capital fund.
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Selling Business
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Easiest form to sell as could sell some of the
shares instead of whole business.
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