Hi,
Just wanting to know if sole traders and partnerships have to include their personal debts i.e. home mortgage in their business profit and loss statements/balance sheet ?
Thank you
No, you have a partnership return prepared and the income is split in accordance with the partnership agreeement/%. This income/loss is then distributed to your personal income tax return.
As for including personal debts into a partnership – the partnership is its own entity (although there is unlimited liability), so personal debts do not come into it unless you are using those assets to fund a loan to the partnership.
Thank you for the response.
Another question if you are using a personal asset partially for your business such as a car and you have a personal loan against this asset.
Would you only include only half the debt/expenses incurred in operating the business in the financial statements ?
It depends upon how much you use the car – keep an ATO approved logbook for 3-6 months (recording every trip, odo readings & purpose), record all costs (rego, servicing, fuel, oil, tolls etc). Split costs according to what your accountant then recommends.
Don't forget partnerships are very risky as all partners are jointly and severably liable for the whole partnership debt. If all the other partners decide not to pay you will be left to wear it.
I would recomend to never form a partnership of individuals
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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