So you’ve decided to take on the new and exciting challenge of starting your own business? Well, it doesn’t have to be challenging if you’ve considered these 7 questions.
We’ll take you through some of the important steps and finer details involved in starting your business to make sure that you can hit the ground running.
1. What Is My Business Going To Be?
If you want to start your own business, you will need a business plan. Start to document some of your innovative or unique ideas and write a brief outline of what you want to do.
Consider the purpose of your business, the viability of your idea and how to approach any of the risks that you might face.
If you have business partners, you may also want to document the nature of your relationship/s as you go through this process.
You may also want to start thinking about some of your marketing and business financing strategies, as well as how you will price the product or service that you offer to customers.
2. What Business Structure Is Right For Me?
Choosing the best business structure for you is one of the key decisions that you have to make when starting a business.
It is important to get this right from the start as it can impact many aspects of your business, including your legal obligations, financial and tax obligations and the future direction your business takes as it grows.
You can change your business structure as you expand but it can become more complicated if you want to restructure later.
The most suitable structure for you will depend on your individual circumstances and business needs. We’ve discussed the three most common structures (sole traders, partnerships and companies) and their pros and cons here.
Briefly, when choosing a structure, you should consider factors such as the size and value of your business, how risky your activities are, how much initial capital you have, and the level of control you want to have:
- Sole Trader. This is the cheapest structure and is relatively easy and inexpensive to set up. It will offer you the most control but sole traders also have unlimited personal liability so your personal assets may be at risk.
- Partnership. This structure involves two or more people who run the business together. Partners share both the profits and the losses arising out of the business so you can be personally liable, even through your partners’ losses.
- Company. Incorporating your business can be more expensive and complicated than other structures. However, a company is a separate legal entity and you will have limited personal liability.
Suzi is a photographer who wants to start selling her own prints. She registers to become a sole trader.
Although her personal assets could potentially be used as collateral for any business debts, Suzi isn’t too worried because her photography business has low value and her activities are low risk.
The profit that she makes from selling prints to customers are taxed as part of her personal income.
There is also a fourth structure known as a trust which sets up a separate entity for the benefit of a third party. This can be more complicated and you should contact a tax advisor or accountant. Get in touch with us and we can point you in the right direction.
3. Register For An Australian Business Number (ABN)
In order to carry on a business in Australia, you will need to register an ABN with the Australian Business Register. An ABN is a unique 11 digit number which helps to identify your business to others for tax purposes. It also allows you to claim goods and services tax credits, register for PAYG Withholding or get a domain name for your business’ online website.
If your business will be incorporated as a company, you will need to first register an ACN with the Australian Securities and Investments Commission (ASIC). An ACN is a unique 9 digit number used to identify the company and for monitoring purposes by ASIC. Once your company is set up and ready to start doing business, you can then use your ACN to register for an ABN.
4. How Do I Protect My Business Name?
If you’re trading under a business name, it is important that you choose a name that isn’t already being used. Your business name will help your customers tell you apart from your competitors and hopefully become something that they know and trust. You can easily check the availability of a business name by doing a quick search on the ASIC website.
There are two steps to protecting your business name.
- Register with ASIC. You can do this easily through the ASIC website for a small fee.
- Register a trade mark. You can register a trade mark with IP Australia for exclusive legal rights to use your business name.
Trade marks are a form of intellectual property and are used to protect your business brand, image and reputation. Simply registering your business name with ASIC does not give you any exclusive rights to use it during certain business activities. That is, if you haven’t registered a trade mark, someone else could use your business name or a similar version of it. Also, if someone else registers a trade mark over something similar to your business name or logo, they could prevent you from using your own business name or logo.
Registering a trade mark becomes increasingly important as your business grows and you begin building your brand reputation and image. It is a low-cost preventative action that you can take early on to protect your assets.
5. Where Will My Business Operate?
It is also important to consider whether you want your business to operate on physical premises or as an online website, or both. While traditional business premises will allow you to create personal relationships with your customers and employees, a website is inexpensive, widely available to customers everywhere, and “open” for business 24/7.
If you choose to have an online website, you will need to outline the relationship between your customers and your business in various legal documents.
Website Terms & Conditions Of Use (T&Cs)
Website T&Cs will tell users how they can and can’t use your website. They also include terms which limit your liability if anyone suffers detriment after relying on information on your website or third party links from your website. Your Website T&Cs should apply to everyone who visits your website.
If you provide a service through your website or run an eCommerce store (where you sell products to customers through an online platform), you will also need some additional terms and conditions in place between your business and your customers. Your T&Cs will depend on the nature of the product or service that you offer but will need to comply with the relevant Australian consumer laws.
For example, if you are operating a Software as a Service (Saas) business, you will need to include a software licence which tells users how they can and can’t use your software. T&Cs will also cover issues such as how to make a payment or cancel a service, such as through a subscription.
For an eCommerce store, there are a number of issues that you will need to cover through the T&Cs. Some of the key things to include are: how to process an online payment, delivery/pick-up procedure, refund policy and liability limitations.
Your customers should be provided with these T&Cs prior to payment or registering for a service. Important clauses should also be displayed in a clear and prominent way on your website, such as disclaimers or risks. This could be done by requiring that a customer ticks a check-box which states ‘I have read and agree to the Terms & Conditions’, with a hyperlink to your T&Cs.
6. How Do I Set Up My Legals?
Choosing a small business lawyer can be intimidating, but it is important to ensure that you address all legal requirements to protect your business. Having your legals in order early on will generally help make sure that you’re paid on time, avoid disputes and limit the extent of your liability.
Some of the legal requirements for starting a small business may include:
- Depending on the business structure that you choose, you may need either a Partnership Agreement, or a Shareholder Agreement (if there are multiple shareholders of the company).
- Supplier contracts. Contracts with other businesses, like suppliers, will ensure that you are clear on payment methods, what to do if there are supply issues, and whether your business relationship is intended to be exclusive.
- If you’re employing others to assist with your business operations, you may also need either employment and/or contractor agreements.
7. What Are My Financial And Tax Obligations?
Registering for the correct taxation obligations are key to ensuring that you avoid any legal penalties. You will need to have a Tax File Number (TFN), whether it’s your own individual TFN if you’re a sole trader or a separate TFN registered for your partnership, company or trust.
As a small business owner, some of the taxes that you will need to register for include:
- Goods and services tax (GST). GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. It is compulsory for all businesses with an annual turnover of more than $75,000.
- Pay as you go (PAYG) withholding. PAYG is a compulsory tax where you must withhold payments from your employees and also, any contractors who have agreed for you to PAYG for them. You must provide these amounts to the ATO and record your withholding.
- Fringe Benefits Tax (FBT). If you provide fringe benefits or perks to your employees, such as a company car, discounted goods, Christmas parties or low interest loans, you may have to pay an FBT.
There are many aspects to starting a new business and you want to get it right! If you want to talk through your options or get some guidance as you go through this process, we’re here to help. Get in touch with our team at 1800 730 617 or firstname.lastname@example.org for a free, no-obligation chat.
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