Many small businesses change their business structure for a multitude of reasons. Whether it be from a sole trader to a more complex company or trust structure, especially when the business environment changes, this can lead to errors.

Some of the most common errors seen include:

• Reporting income for the wrong entity
• Claiming expenses incurred by another entity as business expenses
• Personal use of business bank accounts

If you have transitioned from a sole trader to a company, it is important to remember that:

• The company is a separate legal entity from yourself individually as shareholder or director
• Money that the company earns, belongs to the company

• The company owns its assets, you cannot treat them as your own
• If you, as director or shareholder of the company, use company assets for personal use, it must be properly treated as a benefit to yourself

If you have moved to a trust structure, the trustee responsibilities include:

• Holding the trust property (assets, investments, income etc) for the benefit of the beneficiaries
• Managing the trust’s tax affairs
• Paying some tax liabilities

If the move from sole trader to company or trust is something you are considering, choosing the right structure for you is important.