TAX ESSENTIALS FOR BUSINESS • STEP 2 OF 4
See It: Tom's Business Tax Journey
Structure first, then strategy. Get this wrong and you'll pay for it every year.
— Anonymous
Follow Tom as he grows his consulting business from $80k to $200k and discovers how structure impacts wealth.
Your Learning Journey
Your Learning Journey
This Step Takes: 20 minutes
Follow Tom's 5-year journey, make decisions at key turning points, and see the tax impact of each choice.
What You'll Learn
See exactly how structure choice impacts tax over time. Understand when to incorporate, when to add a trust, and where to hold assets.
Real examples of how structure impacts tax over 5 years.
2015
Meet Dave, a plumber earning $80k/year as a sole trader. He's ready to grow his business.
What Tom Did Right (Optimal Path)
Here's the exact structure that saved Tom $185,000 over 5 years.
Year 1-2
Sole Trader
Started simple at $80k income. Low tax (22.5%). No setup costs. Perfect for testing the business.
Year 2-3
Pty Ltd Company
Incorporated when income hit $180k. Paid 30% vs 37-45% personal rate. Saved $24k/year.
Year 3-5
Company + Trust
Added trust to split $200k income with wife. Saved extra $10k/year. Property held in trust for flexibility.
Total Tax Saved: $185,000 over 5 years
Sole trader path: $280k tax. Optimal path: $95k tax.
That's $37,000 per year Tom kept by structuring correctly. That money went into investments, compounded, and accelerated his wealth building.
Key Insights from Tom's Journey
Timing Matters
Layer Your Structure
Think Long-Term
💡 The $100k Rule
This is the magic number where incorporating becomes a no-brainer. At $100k, the tax savings ($20k+/year) easily justify the setup and compliance costs ($3-5k/year). Below $100k, stay simple. Above $100k, get serious about structure.
Tax-101 for Business - See It: Complete
- Tom saved $185,000 over 5 years by structuring correctly as his business grew
- Incorporate when income consistently exceeds $100k—every year you delay costs $20-30k
- Company + Trust is the optimal structure for most profitable businesses with family income-splitting opportunities
Homework
If you're earning $100k+, what structure are you using? Are you leaving money on the table like Tom almost did?
Calculate your current effective tax rate: (Total tax paid ÷ Total income) × 100. If it's above 30% and you earn $100k+, you need to restructure.
What's Next?
20 minutes