Should I form a company?

nitroman · 07-01-2007, 07:45 PM

Just a question for those of you who are financially educated.
Instead of working for my boss making 15 bucks an hour, paying income tax and struggling to pay for everything else, could I form a company,charge my boss say 30 bucks per hour, claim my xr8 and fuel and whatnot as expenses for running my business and then pay tax on what I have left?
I want to get out of the rat race so any input will be very appreciated.

DanXR6T · 07-01-2007, 07:51 PM

What exactly makes your boss want to pay you double for the same service?

rodderz · 07-01-2007, 07:54 PM

$30 and hour sounds a bit low for running your own business, particularly when that cost has to cover all car costs, business insurance, super, tax, admin costs, phonecalls,travel, purchasing of your own equipement, plus the time that you work. It would be relative to what your work is and whether you are using the old company's resources, equipment etc.

The overall rate drops by a fair bit once you take all that into account

AU2PWR · 07-01-2007, 08:04 PM

What do you do for a Buisness ,

AU1XLS · 07-01-2007, 08:10 PM

Quote:

Originally Posted by rodderz

$30 and hour sounds a bit low for running your own business, particularly when that cost has to cover all car costs, business insurance, super, tax, admin costs, phonecalls,travel, purchasing of your own equipement, plus the time that you work. It would be relative to what your work is and whether you are using the old company's resources, equipment etc.

The overall rate drops by a fair bit once you take all that into account

dont forget holiday & sick pay.
What is it you do?

xr8-200 · 07-01-2007, 08:16 PM

From what your saying it sounds like you want to go from staff to being a contractor within the same company.
Have you just read rich dad, poor dad by any chance, nitroman?

schmidty · 07-01-2007, 08:16 PM

$30 per hour is bugger all if you intend to do things properly. By the time you pay insurances, super, long service, sick pay, holiday pay, personal leave, and all the rest you're really making the equivalent to say $22 per hour on wages, if that, and you all of a sudden have after hours paperwork to do and money to chase, tax to withhold. Plus get treated like a leper for the first 2 years by banks unless you have considerable equity in your house etc.

IMO you'd be much better off trying to negotiate a better deal with your poss. If you could get him up to $22 per hour, you'd be better off than working for $30 as a subby.

No hassles, no paperwork, no expenses. Your pay is your pay. Only thing that i suppose might be alright is the tax breaks. But there are still ways and means of claiming considerable tax deductions without being self employed. Just need a good accountant.

nitroman · 07-01-2007, 08:22 PM

I'm a mechanic at a small Ford dealership. I am the head mechainc and in charge of tyres and wheel alignments

Interceptor · 07-01-2007, 08:33 PM

you get $15/hr as a head mechanic? jesus christ, i get $18.50 as an electricians TA, and i get charged out at $60

AU2PWR · 07-01-2007, 08:35 PM

Damn , 15 An Hour for a Grease Monkey , Somthings wrong there

rodderz · 07-01-2007, 08:36 PM

I'de say as a subbie you'de be wanting at least $38-40/hr +GST

All other trades I've come across so far have at least that

flappist · 07-01-2007, 08:48 PM

The fact you even ask the question implies you should do a LOT more research.

With your $30/hr you need to:
Pay your own workers comp.
Pay provisional tax.
Pay your own super.
Pay GST on your earnings.
Pay professional liability insurance.
Pay for any mistakes you make or parts you break.
Pay your own holidays and sick pay.
Pay your own accounting fees (a LOT more than H&R block payg)
Pay for your own training and tools etc.

as well as your current expenses.

In addition as you are now self employed with no history and not proof of continuing contracts you will find the banks are not so friendly.

I charge $143/hr and I still need to be careful with cash flow.

AU1XLS · 07-01-2007, 08:48 PM

Quote:

Originally Posted by Interceptor

you get $15/hr as a head mechanic? jesus christ, i get $18.50 as an electricians TA, and i get charged out at $60

What only $18.50 maybe you should negotiate we pay around $ 23-24+ allowances

nitroman · 07-01-2007, 08:52 PM

It's (more accurately) 15.90 ph plus 100 dollars incentive for working there. I usually end up with 600 in the hand, but once car, rent, food etc comes out it's nothing!. My only real extravagence is my xr8, but I was wondering if i could juggle my finances to a greater advantage. I've got about 20,000 dollars worth of tools that make me more productive than the other mechanics, but no matter how fast or efficiently i work I never seem to see any benefit financially.

nitroman · 07-01-2007, 08:55 PM

Quote:

Originally Posted by xr8-200

From what your saying it sounds like you want to go from staff to being a contractor within the same company.
Have you just read rich dad, poor dad by any chance, nitroman?

I'm reading it now and It sounds good, it's got me thinking about my money at least..

SNB05T · 07-01-2007, 09:00 PM

Quote:

Originally Posted by Interceptor

you get $15/hr as a head mechanic? jesus christ, i get $18.50 as an electricians TA, and i get charged out at $60

sh$# dude im a pastry chef at woolies and even i earn $18.50/hr you're getting rorted mate

:

Psycho Chicken · 07-01-2007, 09:05 PM

My $12 an hour as a third year is looking pretty good!

XRchic · 07-01-2007, 09:06 PM

Eamon (Cobra) has just left the trade of motor mechanics (Ford dealership) due to low pay etc. He was fully qualified, on around $15 an hour. No real incentives either. Plus they got treated very poorly, and guys who had been there for a decade or so were only on a few bucks per hour more. Disgraceful.

Charge rate was $93 an hour from memory. He is getting more money, better treatment, more opportunites and more overtime etc, working at the local abattoir!

He hated it so much that even the idea of starting up his own high end performance business didnt appeal.

Aside from that, being in business is HARD work. And you still have the equivalent expenses to pay, such as all the taxes plus you have a lot more paperwork and you are assuming a lot more risk, as you are usually putting in a lot of your own money as capital for the business.

Its a hard world out there for small businesses these days, and you dont get cut much slack, and if you stuff up, it can cost you big time.

xr8-200 · 07-01-2007, 09:07 PM

Quote:

I'm reading it now and It sounds good, it's got me thinking about my money at least..

I finished it a couple of days ago and it got me thinking too.

**Silver Ghia** · 07-01-2007, 09:25 PM

Looks like we know now why good mechanics dont stay at dealerships.

Even though labour charges are high, I would pay even $10 over that if I knew the guy working on my car was a fully qualified and very competent mechanic. Normally its an apprentice.

Having said that however, at my local Ford dealership I havent had any complaints for quite a while, they seem quite competent.

XRQTR · 07-01-2007, 09:38 PM

The best advice I could give you is to try the old "got a better offer", tell them you were offered about $24.50/hr plus allowances to work for one of the other mobs.

Better still though send your resume/cv to a few of the others, if not all, with a cover letter saying that your looking to broaden your experience and would love the opportunity blah blah frign blah, I think you get the drift. What will happen especially if you are as good as you say they will most likely make an offer and a good one at that, then go back to your current employer and put it to them, either they match it or your gone.

This would be the best way because your not using some company that they might actually have friends at and could quite easily check your story, the upside of course is better money no matter which one you end up with.

I can't see why they would re sign you as a contractor though as you would still be costing them less than this figure of $30 now. Unless it is an offer they made you, then I would be looking at no less than $35-$40/hr keeping in mind that you would be coming into this with as you say about $20,000 worth of tools, don't forget that you would then have to keep buying more to keep up with new tooling for newer models.

Good luck with it
Stef

phoon · 07-01-2007, 10:21 PM

Check with the tax department. If you are a contractor working for one company only, you will find that it will be deemed to be a master / servant relationship. This means that you will not be allowed to run your business, but will have to be included on the employers payroll same as you are now.
You can apply for a special ruling, but will need to meet certain criteria from the tax department. Its not as easy as you may think it is. On the other hand, if you do at least 4 hours work per week for another company as well, you will be ok, no special ruling required.

Cheers

Jeff

phoon · 07-01-2007, 10:36 PM

Quote:

Originally Posted by flappist

The fact you even ask the question implies you should do a LOT more research.

With your $30/hr you need to:
Pay your own workers comp.
Pay provisional tax.
Pay your own super.
Pay GST on your earnings.
Pay professional liability insurance.
Pay for any mistakes you make or parts you break.
Pay your own holidays and sick pay.
Pay your own accounting fees (a LOT more than H&R block payg)
Pay for your own training and tools etc.

as well as your current expenses.

In addition as you are now self employed with no history and not proof of continuing contracts you will find the banks are not so friendly.

I charge $143/hr and I still need to be careful with cash flow.

You are correct Flappist, eveybody seems to forget that although you may be getting $15 p/h, reality is that it probably costs your employer $30 ph anyway with all the on costs, super, insurance, workcover, payroll tax, annual leave, sick leave etc etc etc the list goes on. Whilst I dont think $15 ph is very good for your profession, think long and hard before you approach your boss. Consider if he doesnt need you in one day or for 2 days, no income and once you make the move, it might be hard to go back if it doesnt work out. if you want to start your own business, take it slow and try something like mobile mechanical work from home on weekends for a while before you take the big leap completely. It may sound like alot of work, staying in your current job and also working weekends, but believe me, thats what having your own business is, hard work with long hours.

rodderz · 07-01-2007, 11:04 PM

Quote:

Originally Posted by phoon

Check with the tax department. If you are a contractor working for one company only, you will find that it will be deemed to be a master / servant relationship. This means that you will not be allowed to run your business, but will have to be included on the employers payroll same as you are now.
You can apply for a special ruling, but will need to meet certain criteria from the tax department. Its not as easy as you may think it is. On the other hand, if you do at least 4 hours work per week for another company as well, you will be ok, no special ruling required.

Cheers

Jeff

There was a guy who worked for a large irrigation company that worked at some jobs I was at who was a subbie but worked for them full time, they ended up putting him on the books last year as more than 80% of his work was for them. I vaguely remember him saying that if the work is more than 80% at the one company you go onto the books anyway

pauljh74 · 07-01-2007, 11:53 PM

Gee, I get paid $16.50 an hour as a Storeman - permanent part time. My other job I get paid $24 as a casual - as a dockhand/forklift driver at a transport company. Both jobs are pretty much unskilled.
It would be worth while at least looking at the job market and seeing what you could get elsewhere.

FTe342 · 07-01-2007, 11:59 PM

Good town Young, I has a business there for 5 years in the 80's. I have been in finance for > 30yrs so feel qualified to answer.
All said so far has been correct and good advice.

Seems like the boss goes Brute racing at your expense?

The short answer is in your current situation you can't form a company to keep doing what your doing and earn more net income (for reasons already given)

So you have 4 choices :- 1) Stay where you are with current employer
2) Change employer for more money (either in same town or move elsewhere and then weigh up comparitive cost of housing)
3) Start your own business and become a competitor of your boss
4) Stay where you are and get a second job (total hours may well be no more than if you have your own business)

I guess we could throw a 5th option in there and say you could write a book with a catchy theme, like " how to make more money" and then make more money from the people who buy it. Think about it! The bloke who wrote this book is promoting ideas that are not even relevant to Australian law. There are people who write books about how to make money from real estate by doing this or that but the concepts don't fit into Australian finance options and so on so its not feasible here but they are making money selling books.
Unless you win the lottery (and yes I do buy tickets) there is only one way to get ahead and thats hard work including longer hours. That's the trade-off. Generally speaking, self employed are better off from a tax point of view. That's the "reward" for becoming an employer (even if you are only employing yourself) and having the balls to go into business for yourself. You take the risk and earn the profits (or wear the loss).
Oh, and you don't need a company business structure to be self employed. You can be a sole trader (with or without a reg'd business name) or you could be a partnership (with or without a reg'd business name). A company structure can have some advantages but usually only puts more of your gross profit into your acct's pocket with additional gov't ongoing admin costs so you make less net profit.

I'm not saying don't do it. I know a few self employed mechanics who do very nicely but they both have Pink Slip tickets to do regos (thats where the money is)

Good luck

fmc351 · 08-01-2007, 04:24 AM

First step, read the thread again.

Then do a small business course nights at TAFE.

Lease a shed with equipment, compete.

Thats what Id do anyway, roll the dice.

4.9 EF Futura · 08-01-2007, 09:57 AM

Quote:

Originally Posted by flappist

The fact you even ask the question implies you should do a LOT more research.

With your $30/hr you need to:
Pay your own workers comp.
Pay provisional tax.
Pay your own super.
Pay GST on your earnings.
Pay professional liability insurance.
Pay for any mistakes you make or parts you break.
Pay your own holidays and sick pay.
Pay your own accounting fees (a LOT more than H&R block payg)
Pay for your own training and tools etc.

as well as your current expenses.

In addition as you are now self employed with no history and not proof of continuing contracts you will find the banks are not so friendly.

I charge $143/hr and I still need to be careful with cash flow.

On top of all this, remember that your time has a dollar value. Late nights filling out the business activity statement... no one's going to be paying for you to do that.

Weigh up the real costs - financial and time - and look at how much you think you'll be pulling in.

You might find that $$$ divided by the extra time of running your own business will erode your hourly rate significantly.....

superpursuit83 · 08-01-2007, 11:27 AM

I also say forget $30.00 per hr. Flappist has it right, and EF Futura has a point too. I make a good living now, but it took 20 years of stress and headaches. I sold my main contracting bussiness last year and now try and calmly keep 10 people employed and 8 cranes working. The only thing stopping me closing the doors and cleaning toilets for a living is my 10 employees and there family's.

Think hard about wether you really want MORE! bosses than you have now and be prepared to put in 3 times more work for only a little more pocket money.

But in the same breath, I say go for it if you really want to. But get a bit of education and a good accountant.

John

nitroman · 08-01-2007, 02:29 PM

Thanks for all the advice people. I think a business course at tafe might be the go first, and then go and rent out a shed and start my own workshop specialising in rego's and rego repairs.