Afx9003: Accounting Assignment 1
Business and Management
Submitted By katewendy
AFX9003: Accounting Assignment 1
There are three options for Christina and David in terms of selecting a business structure. These are sole proprietor, partnership and company.
Option 1: Sole proprietor
A sole propriety is an option for the start-up whereby one individual of the pair would control and manage the business. For example, David starts up, controls and manages the business and Christina is merely employed by David. The registration requirements of a sole proprietor would include David as the owner applying for an Australian Business Number and for a Tax File Number (Birt et al. 2012). David will need a TFN as and income he earns as a sole trader will be treated as his income and taxed accordingly. David will have sole responsibility for paying tax on the business’ income.
David will have many options for the way he chooses to report the entity’s financial position. This may include using an accounting package such as MYOB to determine profit. A sole-trader structure is commonly used for hairdressers and tradesmen (Birt et al. 2012).
Advantages: * The company start-up and wind-down is fast and is not costly. * The paperwork required to start-up is minimal (Birt et al. 2012). * David will have complete autonomy over the running of his business. * David will not be bound by accounting standards and legal regulations. * David can use accounting packages to report financial position of company- easier to use. * David does not pay a separate income tax for his business (Birt et al. 2012).
* David as the owner will have full and sole liability for all business debts. * As the business is not a separate legal entity, David as the owner will be at threat of claims being made against his personal assets. * There are no guidelines for David to follow when he is producing financial reports and...