Simple Accounting Trick
28 September 2018
SIMPLE ACCOUNTING TRICK
One of the best and easiest accounting/tax/structure tips is to keep things simple.
If you have five Trusts, two Companies, a Partnership, Sole Trader and Limited Partnership, then that is a lot of financial statements, a lot of tax returns, and a lot of Minutes. And, of course, a lot of cost getting your annual financial statements and tax returns completed! It also means that there will be a lot of bank accounts, as well as a lot of administration involved for each one.
So, if possible, try to have the least amount of structure or entities possible. One Trust would be thousands of dollars cheaper to run each year than the five Trusts, two Companies, Partnership, Sole Trader and Limited Partnership.
Only add a new entity if there is a benefit in doing so. Some benefits could be:
- Asset protection: You don't want all your eggs in one basket if everything goes wrong.
- Tax minimisation: Just make sure you understand how it works and why. Often complicated and fancy structures or ideas are viewed as tax avoidance by IRD and can end up giving you a whole lot of issues.
- Separation of long term holds from trading: This doesn't mean the long term holds aren't tainted, but at least they are separately identifiable and obviously not part of the GST entity.
- Transactions involving other parties can require different structures.
- An LTC (Look Through Company) owned by a Trust can be easy to manage with banks, suppliers, etc.