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When you run a business, what may seem like the smallest details are often the most important — especially when it comes to finances. Keeping track of both major and minor expenses is vital, as they can help gain insight into the financial health of business.
This is where professional bookkeepers come in. Bookkeepers specialise in managing and maintaining accurate financial records, giving businesses the confidence that their finances are in expert hands. If you’ve been thinking about starting your own bookkeeping business, you could be offering a service that many businesses are happy to utilise. However, before you begin helping others organise their finances, it’s essential to set up your own business the right way from the start.
What Is Bookkeeping?
Bookkeeping is essentially the process of tracking a business’s financial transactions. A bookkeeper, or a bookkeeping business, is hired to handle this task. This service often saves businesses significant time and effort, allowing them to focus on other aspects of their operations. Additionally, many businesses prefer to leave this responsibility to experts to ensure accuracy and avoid overlooking important details.
Bookkeepers typically manage records and track matters such as:
- Taxes
- Assets
- Loans and credit statements
- Payroll
- Inventory
- Purchases
- Sales and revenue
Basic bookkeeping tasks don’t require specialised qualifications (though we encourage ongoing training and learning regardless). However, more complex tasks, such as providing BAS services, must be handled by a registered BAS Agent with the Tax Practitioners Board (TPB). Therefore, it’s essential to ensure that both you and your bookkeepers are well-prepared and properly qualified to meet the needs of your clients.
How To Start A Bookkeeping Business
To start your bookkeeping business, you’ll need to create a business plan and register your business. Before you think about skipping the business plan, consider that your decision will directly impact the type of business structure you choose for your bookkeeping business. A well-drafted plan will set the foundation for a smooth registration process and future growth.
Write Up A Business Plan
Don’t be one of those business owners who point to their head and say, “It’s all up here.” While that might be true, it’s always better to write your ideas down and create a comprehensive, well-structured plan. A clear business plan will help you effectively communicate your vision to relevant parties and make it easier to stay on track.
Much like a map, a business plan serves as the blueprint for your business. It lays out the details of your goals, strategies, and operations. Take the time to think through and document every aspect carefully—shortcuts can lead to missed opportunities or obstacles down the road.
For tips on writing a business plan, check out our article here.
Register Your Bookkeeping Business
After you’ve ironed out the details for your bookkeeping business, it’s time to register your business. To do so, you’ll need to decide on the business structure that best suits your needs. Choosing the right structure is an important step, as it impacts how your business operates, your legal obligations, and your personal liability.
In Australia, the most commonly registered business structures are sole trader, partnership, and company. Let’s take a closer look at them.
Sole Trader
A sole trader business, as the name suggests, is ideal for individuals who want to be the sole owner and operator of their bookkeeping business. This structure allows you to operate independently; however, it also means your business is attached to you personally. When you register as a sole trader, there is no legal separation between you and your business, which can pose risks—particularly if something goes wrong.
Registering your business as a sole trader is a relatively straightforward process. You’ll need to apply for an Australian Business Number (ABN), which can be done online at no cost. If you plan to use a business name that is different from your personal name, you’ll also need to register the business name separately.
Partnership
If you plan to start your bookkeeping business with a partner or multiple partners, you might consider registering your business as a partnership. A partnership is similar to a sole trader business in that there is no legal separation between the business and its owners. However, in a partnership, liability is shared equally among all partners, rather than being the sole responsibility of one person.
Setting up a partnership is similar to setting up a sole trader business. To register your partnership, you’ll need to apply for an Australian Business Number (ABN) for the business. Additionally, if the business name does not consist of the partners’ names, you must register a business name.
Company
A company structure is more complex to set up than other business structures, but it offers the advantage of the greatest legal protection. A company is an independent legal entity, meaning it exists separately from you. This provides limited liability, so if the company faces financial trouble, your personal assets are generally protected. A company structure is ideal for serious business ventures, as it supports growth and ensures better longevity for your business.
If you want to establish your bookkeeping business as a company, it’s highly recommended to seek the help of a legal expert. While it is possible to handle the process on your own, setting up a company involves laying the foundation for your bookkeeping business. Key considerations include determining shareholders, appointing directors, establishing governance rules for company officeholders, and addressing other critical operational matters. Getting it right the first time can save you the hassle and expense of restructuring in the future.
Do I Need A Licence To Start A Bookkeeping Business?
No, you don’t need a specific licence to start a bookkeeping business. However, this doesn’t mean there aren’t any licences or permits you might require.
Firstly, you may need to apply for local council permits or complete a registration form before starting your bookkeeping business. Each locality has its own set of rules, so it’s important to research any specific requirements in your area to ensure compliance.
Secondly, as mentioned earlier, certain bookkeeping activities may require you (or your employees) to be registered as a BAS agent with the Tax Practitioners Board (TPB). To become a registered BAS agent, you’ll need relevant qualifications in accounting or bookkeeping, as well as a specified amount of work experience.
Additionally, while not legally required, many bookkeeping businesses choose to attain professional membership within their industry. These memberships often require businesses to meet certain standards, which can enhance credibility and trust with potential clients.
What Contracts Are Required For My Bookkeeping Business?
When starting your bookkeeping business, it’s important to remember to get well drafted contracts that protect your business from unwanted trouble. It’s best to consult with a legal expert regarding the exact contract you’ll be needing however, here’s a few to keep in mind:
Service Agreement: This is a contract between you and your clients, outlining matters such as scope of services, payment, termination and liabilities.
Employment Agreement: When you hire staff, it’s vital to have a contract that covers all aspects of an employee’s rights and responsibilities, such as pay, leave, termination, confidentiality and role description.
Non-Disclore Agreement (NDA): Maintaining privacy can often be essential to business operations – that’s when an NDA comes in handy.
Privacy Policy: Building a website for your bookkeeping business? Make sure you have a privacy policy there if you plan on collecting any kind of personal information from your users to stay compliant with privacy laws.
What Laws Apply To A Bookkeeping Business?
When starting your own bookkeeping business, it’s also crucial to be aware of the rules and regulations that will impact your business. From upholding consumer rights to obeying privacy laws, there’s a number of legal factors your business will need to consider. A few of them include:
- Australian Consumer Law (ACL)
- Industry Regulations
- Local Council Rules
- Data & Privacy Law
- Employment Law
- Intellectual Property (IP) Law
Chatting with a legal expert can help you determine the exact legal obligations your bookkeeping business has. It’s important to understand these obligations early, so you can ensure legal compliance is well engrained into your business practices.
Key Takeaways
Starting a bookkeeping business can be an excellent venture with the potential for stability, but it’s crucial to consider the legal aspects of setting up your business. To summarise what we’ve discussed:
- Bookkeeping involves managing financial transactions and records, including taxes, payroll, sales, and expenses, which helps businesses maintain accurate financial health.
- Basic bookkeeping doesn’t require formal qualifications, but offering BAS services requires registration as a BAS agent with the Tax Practitioners Board (TPB).
- To start a bookkeeping business, create a business plan to outline your goals, structure, and operations, and choose the appropriate legal structure (sole trader, partnership, or company).
- Sole traders and partnerships are simpler to set up but have no legal separation from the owner(s), while companies offer limited liability and are better for long-term growth.
- Licences aren’t specifically required to start a bookkeeping business, but local permits may be necessary, and professional memberships can enhance credibility.
- Essential contracts include service agreements, employment agreements, non-disclosure agreements, and privacy policies to protect your business legally.
- Compliance with Australian Consumer Law, privacy laws, intellectual property laws, and industry regulations is crucial to running a legally sound bookkeeping business.
If you would like a consultation on starting a bookkeeping business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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