Setting up your own construction company – What are your responsibilities?
You’re working in the building and construction industry and you’ve been told you should set up a company. What does this actually mean for you?
Well, operating your business through a company structure instead of a sole trader structure gives you asset protection, reducing the possibility of your personal assets being at risk.
However, when you set up a company you become the director – and that means you’ll have some added responsibilities.
Your responsibilities as director
Here’s a rundown of what you’re accountable for as the owner of a construction company.
As director, you’re responsible for:
- managing all records and bookkeeping for the company – this can be done by you or by an external person
- preparing and approving annual financial accounts
- meeting the requirements for your builder’s licence – this can be done with your accountant’s help
- preparing, signing and filing minutes for all decisions you make on behalf of the company.
It’s also up to you as company director to:
- ensure the company’s income tax returns are prepared and lodged by the due dates
- prepare and lodge all activity statements by the due dates or face the potential penalties and interest charges.
When you set up your own construction company, you become an employee which means the company’s money is not your money – your wages are your money.
It is also your responsibility to:
- manage employment contracts with staff according to the relevant employment awards
- keep records for employees, including time sheets
- pay employees on time and issue pay slips
- report Pay As You Go (PAYG) withholding tax on your activity statement by the due date
- pay the superannuation guarantee, which is compulsory for employers, by the due date
- pay compulsory workers compensation insurance. If you’re in New South Wales, this is only compulsory if you employ staff and pay more than $7,500 in wages per annum.
You need to ensure that your company is solvent. This means the company must be able to pay its debts as and when they fall due. It’s illegal for a company to trade if it is insolvent.
If your company trades whilst insolvent, there can be severe consequences for you as director, including:
- civil charges of up to $200,000
- criminal charges of up to $220,000 and/or imprisonment for up to 5 years
- personal liability for some debts of the company.
Are you ready for the extra work?
If you’re thinking of setting up a construction company, consider the added costs and ask yourself:
- Am I ready to take on the extra work?
- Do I need support from experts to help me through the process?
If you need help navigating your transition to director of a construction company, get in touch with one of our advisors today.