How We Created a Warmth Within Inspire Cafe

It’s fairly commonly witnessed that we’re 50% more likely to share a bad experience on social media, than we are a good one.

To buck that trend is exactly why I’m sharing our experience with Li Wang, aka “CreativLi” in this short video.

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We contacted Li early into our design and build stage of Inspire Cafe, back in October 2013.  We’d known of Li through our partnership with global giving initiative, B1G1: Business for Good – and been really excited with the designs and branding that she’d put together for other businesses.

We needed something Inspirational, to fit in with our theme, events and culture here at Inspire CA & Inspire Cafe.  Li looked after the vinyl print on that cover the glass of our meeting rooms and also extended this geometric design onto the back feature wall, where the “Inspire Cafe” logo is positioned.

From the first interaction with us, Li was extracting my thoughts and vision for what we wanted here at Inspire Cafe even though I couldn’t put it into words. The result was phenomenal.  Months after the design had taken form, we are still getting great feedback that the cafe feels funky, fresh, vibrant and warm.

We are stoked with how it has all turned out!

Business Structuring Made Easy! Part 5: Family Trusts

A trust is a structure wherein a Trustee (either an individual or company) carries on the operations of the Trust on behalf of the beneficiaries. The actions of the Trustee are governed by the Trust Deed, which details the rights and obligations of all parties. Trusts are a common structure choice for family businesses as it enables the various family members to become beneficiaries of the Trust that is operating the business. While the trust is not a separate legal entity it is a separate entity for tax purposes. The trustee must apply for a Tax File Number (TFN) for the trust and lodge an annual income tax return.

If a company trustee is used, the trust offers all the same asset protection benefits as using a company structure, along with the additional benefits of using a trust. A trust that has individuals acting as trustees exposes the trustees (the individual, or individuals) to same levels of business risk as a sole trader.

Broadly speaking there are two common types of trusts that you will encounter when making your business structuring decision: Fixed Trusts and Discretionary Trusts.

Click Here to Download our eBook “Business Structures Made Easy”

Discretionary Trusts

A Discretionary Trust is the most flexible form of business structure for a family trust. No single beneficiary has a fixed interest in the trust’s property or the trust’s income. The trustee has complete discretion in the distribution of funds to each beneficiary. This makes the Discretionary Trust (with a corporate trustee) a strong and flexible option for a family business. The family members are protected from business risk and the trustee has the discretion to distribute the income in the most effective way possible.

It is important to remember that all of the benefits offered by a discretionary trust for a family business make it a poor choice for businesses where more than one family or group is involved, as neither group of beneficiaries retains a fixed entitlement to property or income.

Advantages of a Discretionary Trust:

• Flexibility with income and capital distribution;
• Broader Tax planning opportunities;
• Access to Small Business CGT concessions;
• 50% 12 month CGT discount;
• Asset protection (if a corporate trustee is used)
• Can pay salaries and wages as well as superannuation;
• Less regulatory requirements than trading as a company.

Disadvantages of a Discretionary Trust:

• Distributions must be in accordance with the Trust Deed;
• Risk of resettlement if changes are made to trust members or trust property without giving consideration to the rules outlined in the trust deed;
• Losses cannot be distributed;
• More of an investment to establish and maintain when compared to Sole traders or partnerships;
• Trustees can be personally liable for some debts of the trust (if individual trustees are used).

Fixed (Unit) Trusts

Fixed (or sometimes called “Unit”) Trusts are recommended when more than one family or group is involved in the business operation. The interest in the trust is divided into units, similar to shares in a company. The Trustee distributes income to the beneficiaries in accordance with their respective holdings in the trust. This is the key point of difference between Fixed and Discretionary Trusts: The units remove the Trustee’s discretion concerning the distribution of income.

Advantages of a Fixed (Unit) Trust:

• Fixed Interests provide protection where more than one family or group in involved in the business;
• Asset protection (where a corporate trustee is used);
• Access to Small Business CGT concessions;
• Access to 50% 12 month CGT discount;
• Easy to raise capital by issuing additional units;
• Can pay salaries and wages as well as superannuation;
• Less regulatory requirements than trading as a company.

Disadvantages of a Fixed (Unit) Trust:

• Sale of units can be a CGT event and attract stamp duty;
• Not as flexible as a Discretionary Trust;
• Trustees can be personally liable for some debts of the trust (if an individual trustee is used).

So should you use a family trust?

Business owners looking to shift their business operations into a trust structure can experience a number of benefits. We strongly recommend anyone interested in setting up a trust seek professional advice before doing so. Given the additional requirements of using a trust, we work closely with all clients that use this structure to ensure all their obligations are satisfied and it is used in the most efficient manner possible.

For more information about trusts or other structuring options please refer to our other articles in this series, or contact us for more a business structure review.

Business Structures Made Easy! Part 4: Companies

Unlike a sole trader who essentially is the business, a company is a separate legal entity with directors who run the business and shareholders who own it. When business owners are interested in restructuring their business operations, the most commonly considered option is a company. This is usually because they believe they understand the way this structure works. Business owners are generally aware that a company owns the business assets and provides protection for their personal assets against business risk. However, there is far more to consider when picking a business structure than asset protection. A brief summary of the Benefits and issues of using a company is outlined below.

Pro’s and Con’s of Structuring Your Business as a Company

Advantages of a Company Structure

• Companies can be owned and run by one person;
• Shareholders are not responsible for company debts unless they sign a personal guarantee;
• Easier to attract capital because of limited liability;
• Companies can operate globally and own properties;
• Companies pay a flat 30% tax on every dollar of profit regardless of how much money is earned.

Disadvantages of a Company Structure

• Relatively expensive to establish and register;
• Compliance costs are generally higher and record keeping requirements are more strict;
• Shareholders may have difficulties in recovering their investment because of limitations on who can buy shares;
• Funds taken out of the company as a salary or wage attract the usual PAYG withholding and superannuation obligations;
• Companies that hold CGT assets do not receive the 12 month 50% CGT discount on disposal.

Click Here to Download our eBook “Business Structures Made Easy”

Division 7A

Business owners who are considering operating through a company structure must give due consideration to Division 7A. Division 7A essentially seeks to prevent directors and shareholders of private companies from taking the company’s profits for personal use. Individuals or entities that take ‘Drawings’ from a private company have until the lodgement date of the company’s income tax return to either repay the funds in full or enter into a suitable loan agreement with the company. Failure to do so will result in the amounts being treated as an unfranked dividend which will need to be included in the shareholder’s income tax return for the year. As you can imagine if the sum taken from the company is significant, this can result is a substantial tax bill.

Considering Restructuring into a Company?

Business owners looking to shift their business operations from a sole trader structure into a private company can experience a number of benefits. However, there are also a number of key differences and potential issues that must be understood and carefully managed. We strongly recommend anyone interested in setting up a company seek professional advice before doing so.

For more information about other structuring options please refer to the other articles in this series, or contact us if you’re looking for more personalised advice.

Life’s Too Short: Four Types of Bad Clients That Don’t Belong in Your Business

A few weeks ago I was reading Firm of the Future, co-authored by Paul Dunn (one of my mentors) and Ronald Baker, which included this story.

A young and upcoming partner in a firm was appointed to Managing Partner. He knew there was some tension between team members and certain clients, and he decided to tackle the problem straight away.

He printed out the client list of the firm, handed it out to every team member, and asked them to highlight any client they didn’t enjoy working with. He then proceeded to fire every single client they’d highlighted.

The partners of the firm were horrified to watch $80,000 in recurring annual revenue disappear from their client base.

But three months later, they saw it replaced more than threefold as $300,000 in recurring revenue walked in the door.

The moral of the story? Bad clients drive out good ones.

Here are four types of bad clients who shouldn’t be part of your business

1. The Know-it-All

No matter how many times you suggest how to improve whatever you’re advising them on, they’ve always got a reason why it won’t work, or how their current solution is great. Even if they do become clients, it will be like ‘rearranging deckchairs on the Titanic’ trying to implement change.

The telltale signs:

• They like your ideas, but they say they won’t work in their business or industry
• They like to keep close to your business, but not engage you.

2. The Dairy Farmer

These ones love milking you for all the value you have, and will often expect a high service offering in your base package. In other words, they want a lot but are prepared to only pay a little. No comprende, amigo.

The telltale signs:

• Initial enthusiasm at your product or service offering, but simultaneously…
• Price-sensitive and heavy on negotiations

3. The Rude Dude

In William Swanson’s 33 Unwritten Rules of Management he includes The Waiter Rule: “If someone is nice to you but rude to the waiter, they are not a nice person.”

These tricksters might be engaging and polite to you, but rude to your team. So if you want good morale in your team, you don’t want this type of duplicitous client hanging around.

The telltale signs:

• They are polite to you but are disrespectful to your team
• Plenty of evidence in a social or networking setting.

4. Les Misérables

French for ‘the miserable ones’, and the name of a musical and subsequent film where Russell Crowe ends himself, this type of client or prospect has just survived some really tough times (e.g. the GFC). I’m not discrediting the trials they’ve faced, but rather how they then carry it as baggage into every aspect of their business and their opportunities. Not exactly a mindset you want infiltrating the ranks. If you can’t inspire change, then keep your distance.

The tells:

• They look for the ‘necessary evils’ in your service offerings, not the value they add
• Procrastination and a lack of energy are trademarks for them.

Our Final Reason to Create an Exit Strategy for Your Worst Clients

Having spoken to others who’ve done the same, removing clients who are more trouble than they’re worth is a satisfying and somewhat freeing experience. Not only can it improve morale, it can also improve your bottom line.

But getting rid of a client is never easy, particularly one you’ve had for a while. So if you’d like to know how to go about it, or maybe just a bit more encouragement, get in touch with us.

Business Structures Made Easy! Part 3: Partnerships

A partnership is a common and relatively inexpensive way to set up a business. It involves 2 or more co-owners (the partners) participating together in a business operation. In order for a partnership to exist the partners must have the intention of making and sharing profits, as well as an understanding that they will each act on behalf of the other in all business dealings.

When establishing a business under a partnership structure, a formalised partnership agreement spelling out the rights, responsibilities and obligations of each partner is a good idea, although it is not necessary for the partnership to exist. In the absence of a partnership agreement The Partnership Act of 1891 sets out the various rules that govern the conduct of partners. The act places joint liability on all partners for debts and obligations incurred by the business during their involvement in the partnership. Partners are obligated to keep their co-owners properly informed.

While a partnership is a separate business operation to the partners involved, having its own Australian Business Number (ABN) and Tax File Number (TFN), all the business profits are taxed in the hands of the partners at their respective marginal tax rates.

Pro’s and Con’s of Partnerships as a Business Structure

Advantages of a Partnership:

• Easy and inexpensive to establish and maintain;
• Fewer reporting requirements;
• Any losses incurred by the business may be offset against other income earned (such as investment income or wages) subject to satisfying certain conditions; Partners are not considered an employee of their own business and are free of any obligation to pay payroll tax, superannuation contributions or workers’ compensation on income drawn from the business;
• Relatively easy to change your legal structure if the business grows, or if you wish to wind things up.

Disadvantages of a Partnership:

• Unlimited liability which means all personal assets are at risk if the business operation gets into trouble; Some of the control of business assets and decisions is relinquished;
• Business debts and losses cannot be shared with anyone except the partners;
• Requirements to pay preliminary tax on business income which may not have been earned;
• Limited access to additional capital for business growth;

Click Here to Download our eBook “Business Structures Made Easy”

What do we think of Partnerships?

While a partnership can allow a business access to additional capital and knowledge (if the partners are both individuals rather than companies and trusts), each partner exposes their personal assets to an unlimited level of business risk.  We recommend business owners avoid operating partnerships, especially involving two or more individuals.  If you are currently considering a partnership as a business structuring option we recommend you read our later articles in this series that look at companies and trusts, or contact Inspire CA for assistance.

Inspire Cafe – Bean Scene

This article was originally published in the April 2014 issue of Bean Scene magazine.  Article written by Sarah Baker.

Inspire Cafe
32 Doggett Street, Newstead Queensland, 4006
Open Monday to Friday 7.20am – 2.50pm
1300 852 747

Ben Walker used to live the lifestyle of a typical Chartered Accountant – filing, calculating and staring at a computer screen day after day. The only daily relief would be the few cups of coffee he’d drink.

Now however, the accountant cafe cum coffee entrepreneur has set up what he is calling a world first – an accounting firm office set up in a cafe.

“A typical office job is quite dull and boring. But after speaking to a mentor Paul Dunn, who has been training accountants for more than 20 years, he said, ‘why not set up your firm in a cafe?'” recalls Ben. “At first I thought it was a joke. Then I realised it was actually a very good idea.”

Months later, with the support of crowd funding in addition to his own, Ben set up Inspire Cafe. “We’ve created a really relaxed setting where customers and business professionals can come to network, host informal meetings, work on your laptop or share ideas over a coffee or meal,” says Ben. “It’s a place for professionals to come together to work, rest and play. One customer told us after her visit that her time at Inspire Cafe was the most relaxed she’d been all day. That’s the reaction we want.”

In the mornings, Inspire Cafe is open to the public. Take away and dine-in Esprosini coffee is available with Chief Espresso Officer Cam Silk Sbusy at work on the cafe’s Synchro espresso machine. Cam describes the house blend, named the Roast Master’s blend, as “very smooth with hints of citrus and berry”. “It’s nice and strong on the palette and a great energy boost for our business customers,” he says.

Cam has spent 14 years honing his craft, and isn’t too keen to trade places with Ben anytime soon. “I’m happy to keep working behind the espresso machine,” he laughs. “It’s been a fun challenge to start this place from scratch with just an empty room and build it up to our dream cafe with a great customer base.”

Inspire Cafe invites business firms and clients come in and use the cafe’s meeting rooms and boardrooms, while the space also holds functions and events.

For their hard-working customers, brain food at Inspire Cafe comes in the form of an entire gluten-free breakfast and lunch menu. Favourite items include their bircher muesli, pizzas and egg and bacon rolls – which Cam says walk out the door faster than they can make them.

Inspire Cafe also has a liquor license so Friday night drinks for the business type are the perfect way to celebrate the weekend.

Through their partnership with Buy1Give1’s overseas aid program, for each coffee Inspire Cafe sells, a child in a Malawi village gets access to life saving water. And for each meal they sell, a child in an Indian school will receive a nourishing meal.

CGT Main Residence Exemption – Tips, Tricks, and Traps

Under ordinary circumstances the sale of a property would attract Capital Gains Tax (CGT). However, you can avoid paying CGT if you sell a dwelling that is considered to be your main place of residence. But what is your ‘Main Residence,’ and how do you know if the exemption applies?

Is the Property I’m Selling my Main Residence?

Generally speaking, your main residence is your home. A few examples of factors the Australian Taxation Office (ATO) considers relevant in identifying your main residency are:

• Whether you and your family live there;
• Whether you have moved your personal belongings into the home;
• The address to which your mail is delivered;
• Your address on the electoral roll
• The connection of services and utilities (for example, phone, gas, or electricity);
• Your intention in occupying the dwelling.

 

Please note there is no minimum time a person has to live in a home before it is considered to be their main residence

 

In order for the Main Residence CGT exemption to apply, the property being sold must include a dwelling. A dwelling is anything that is used wholly or mainly for residential accommodation. Examples of a dwelling are:

• a home or cottage;
• an apartment or flat;
• a strata title unit;
• a unit in a retirement village;
• a caravan, houseboat or other mobile home.

A mere intention to construct or occupy a dwelling as your main residence – without actually doing so – is not sufficient to obtain the exemption. You must physically occupy the dwelling.

Can I Have More Than One Main Residence?

You can only ever have one main residence at any given point in time unless you’re selling your old main residence and buying another. In this case you’re entitled to an overlap period of six months as long as:

1) the new property will be your main residence after the sale of the old property;

2) you lived in the old property for at least three continuous months in the 12 months prior to sale; and

3) it wasn’t used to produce rent in this same 12 month period.

Can I Earn Rental Income from My Main Residence?

While you can only have one main residence at any point in time you do not need to live in the dwelling for the entire holding period for it to continue to qualify for the exemption. If you own a property which is currently your main residence you can move out of the property for up to six years. During that time you can earn rental income on the property and claim a tax deduction for expenditure as you would with a normal investment property. Providing you re-occupy the building before the end of the six period and do not dispose of the property within the same financial year that the property was earning rental income you can still qualify for the full exemption.

Does the Main Residence Apply to Property Renovators?

The simple answer is yes! If you purchase a property, occupy the dwelling while undertaking renovations and then sell the property only to move into another dwelling and repeat the process, any profit you make on the sale of each property is generally tax exempt.

Can I Subdivide My Block of Land and Apply the Main Residence Exemption to the Proceeds from the Sale?

As discussed, the main residence exemption requires a dwelling to exist on the property that is sold. If you have a large block of land and subdivide the land so that you can sell off a part of the unused land, there is typically not a dwelling on this parcel. Therefore, any profit on this sale would attract Capital Gain Tax.

However, it is important to note that if the reverse situation applies and you purchase the neighbouring block of land to obtain a larger back yard, the main residence exemption will apply to the sale of your main residence and the adjoining block provided both properties are sold together and the total area of land does not exceed 2 hectares.

What if I Can No Longer Live in My Main Residence?

The main residence exemption can also apply where the owner is no longer able to reside in the dwelling, because they have lost the ability to live independently and require full time care. This ensures that property owners who spend extended a period in hospital, must  relocate to a residential care facility, or who relocate to live with a care giver can still access the main residence exemption when they sell the property to pay living and medical expenses.

[Podcast] The accountant with a coffee shop in his office. – Pricing Power

The original article was published by Pricing Power on 26 March 2014. Written by Steve Major.  You can access the Pricing Power podcast here.

 

Why would an accountant open a coffee shop as part of his accounting business? Ben Walker did and it has created a fantastic business.

Ben Walker lists himself as the Chief Inspiration Officer of Inspire CA (the accounting firm) and the Beer Development Manager of Inspire Cafe  Inspire CA has its mission to inspire people to build phenomenal businesses. The dream for the cafe is create a place where you can enjoy a good coffee and something decent to eat with entrepreneurs and business people.

In the short time that Ben has been in business he has made a mark. I first heard of Ben from a colleague in the United States. Impressive. The cafe is fast becoming a hub for business events and a thriving community.

And by the way Ben does not do timesheets, he value prices, extensively uses the cloud amongst other impressive aspects of his business. During this interview we talk about why he created the Coffee shop and how that changed his business. As Ben talks about it has not all been plain sailing but he has fought hard to create this fantastic business.

Business Structures Made Easy! Part 2: Sole Trader

Should I Trade as a Sole Trader?

Establishing a business as a sole trader is the simplest form of business structure. It is relatively easy and inexpensive to start and maintain.

Many sole traders choose to trade under their own name but this is not a requirement. A sole trader can register a business name with the Australian Securities and Investments Commission (ASIC) and trade using this name instead.

A sole trader is essentially just the individual in business for themselves – they retain complete control of the business operation. There is no division between business assets or personal assets, which includes any assets jointly owned with another person (such as your house or car).

Your liability is unlimited which means that personal assets can be used to pay business debts. The individual is also responsible for remitting the tax on any business profits made at their marginal income tax rates.

After your first year of business profits the Australian Taxation Office will enter you into the pay as you go (PAYG) instalments system. The PAYG system requires regular payments of preliminary tax based on expected profits for the following year. Any excess tax paid as a result of this will be refunded on lodgement of your income tax return.

Pro’s and Con’s of Running a Business as a Sole Trader

Advantages of Trading as a Sole Trader

• Easy and inexpensive to establish and maintain; Complete control of your assets and business decisions is retained by individual;
• Fewer reporting requirements;
• Any losses incurred as a result of business activities may be offset against other income earned (such as investment income or wages), subject to satisfying certain conditions;
• You are not considered an employee of your own business and are free of any obligation to pay payroll tax, superannuation contributions or workers’ compensation on income your draw from the business;
• Relatively easy to change your legal structure if the business grows, or if you wish to wind things up.

Disadvantages of Trading as a Sole Trader

• Unlimited liability which means all your personal assets are at risk if the business operation gets in trouble;
• Little opportunity for tax planning – you can’t split business profits or losses made with family members and you are personally liable to pay tax on all the income derived;
• Business debts and losses cannot be shared;
• Requirements to pay preliminary tax on business income which may not have been earned;
• Limited access to additional capital for business growth;

Click Here to Download our eBook “Business Structures Made Easy”

Word of Warning Against Trading as a Sole Trader

At Inspire CA we strongly recommend business owners avoid operating as a sole trader.

Even a business which is not generating sufficient income to require a great deal of tax planning can still expose the owner’s personal assets to significant risk.

If you are currently operating a small business as a sole trader please refer to the articles later in this series which explore your alternative structuring options, or contact Inspire CA for assistance.