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Joint business venture, simplicity the key

Two friends of mine are planning a joint business venture, which they will operate together in the evenings while continuing to earn income from their usual daytime jobs, outlined as follows:

• One party is currently self-employed in a small business carrying her own name. She is a sole trader with her own ABN.

• The other party is employed in the hospitality industry.

The joint venture will not be connected to either party's regular job.

Does anyone have any suggestions as to how these two can launch and run this new venture from a financial standpoint, with simplicity the key?

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Permalink Reply by JG on July 9, 2008 at 12:48pm

Partnership is simple, but the big danger is the shared liability which can extend beyond the business and see one partner's personal debts impacting the other.

If they're planning on it earning enough money to require GST registration (more than $50k each) then I'd suggest it's worth spending a couple of thousand to set up a proper company structure.

The other big thing is getting an agreement in writing on how the work is being divided and who will expect what from whom. If that's left uncertain things can get really acrimonious later.

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Permalink Reply by JeffK on July 12, 2008 at 10:41pm

The ATO site is a great place to start and I think a Partnership is probably a good structure to consider for your friends:

Choosing a business structure (partnership) - ATO site

And although it may seem like there's a lot to read, it's well worth reading the stuff on the business site before starting:

business.gov.au

And the ATO site too

Starting a business checklist (ATO site)

Running a business is never really "simple", but you can make it easier in the long run if things are set up the right way. And by the sound of things it would seem like a Partnership would be the way to go here.

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Permalink Reply by jacquesk on February 17, 2009 at 10:58am

My only suggestion is that if you are going to go into business with a friend then treat it as a business and do not rely at on the friendship. I have seen schemes, businesses, shared assets and the odd friendship turn sour when the business details have not been nailed down.