E-Commerce Taxes 101: Business Structure and Income Tax
It is known that running an eCommerce business is no walk in the park. With a bunch of operations procedures and financial responsibilities, there truly is a lot at stake. And when it comes to managing your taxes, it's a very different battle.
Many business owners dread the idea of having to manage their taxes. Even if you run a small eCommerce business, taxes are still a huge deal. With that being said, many rely on outsourcing accounting and bookkeeping services to ensure that their finances are in check and ready for tax season and annual financial forecasts.
Without the proper accounting and bookkeeping process, you may end up dealing with a snowball of tax issues, which could ultimately affect your business's operations. But when it comes to business taxes, you need to consider things, such as your business structure and income tax registration.
That’s why we've created a quick guide that could help you with taxes and ownership for your business. So, if you're curious to know more about business structure and income tax registration procedures, keep reading!
Which Business Structure Does My E-Commerce Business Fall Under?
Depending on your cost, risk, tax, and ownership, you can then decide your eCommerce business structure. Besides that, you're also considering the product and services you're offering and the current stage of your business.
When it comes to eCommerce businesses, the typical business structure is a sole trader. Since many small businesses fail due to costs and expenses, a sole trader business structure provides the lowest cost. And as for taxes, it is rarely considered for startups since trading performance is often a loss.
Since startups have multiple business partners, it's a good idea to consider using the partnership as a low-cost structure or proceed to a trust or company structure.
But besides all of that, there are some elements you need to consider when choosing your business structure. These include the following:
Cost: This element includes legal and consultation fees specific to your business's needs and costs for continuous compliance. Included here are your accounting and tax lodgements.
Risk: Another thing you need to consider is the risk of the products and services you are offering. Does insurance cover your business? Are you concerned about personal assets?
Tax: Obviously, taxes are something you need to consider as well. Do you pay more or less tax than necessary? Is your business entitled to all Tax Concessions and Government Grants?
Ownership: Finally, you need to know if you or other people will own your eCommerce business. With that being said, will you be able to manage your ownership and control? How?
Fortunately, when your business grows, you can change your business structure and test the waters. But when you change structures, you must dive in with caution to avoid costly consequences. Working with a tax accountant and lawyer can help with restructuring your business.
What Do I Need to Know About Income Tax Registration?
For sole traders, you may register for income tax purposes as your personal Tax File Number (TFN) since it will also serve as your Sole Trader Tax File Number. However, if you don't have a personal TFN, you can easily register for one online and visit a local Australia Post branch to validate your identity.
As for trust, company, and partnership business structures, you need to register your business through the Australian Business Register Website. Ideally, you want to work with a reliable business accountant to ensure that all your documents and requirements are in place.
The Bottom Line: Work With a Business Accountant to Identify your Business Structure and Income Tax
There's no denying that dealing with your business's finances and taxes can be complicated. For that reason, it's best to work with a business accountant to ensure that your finances are well-managed and that your business complies with tax regulations and laws.
How Can We Help You?
If you're looking for accountants in the Gold Coast, look no further because New Wave Accounting is here to help you.
We understand that keeping tabs on your finances and taxes can be overwhelming; that's why we provide end-to-end accounting and bookkeeping services to help scale and grow your business.
Check out our services and learn more about how we can help you today!