You are about to set up your first business. Congratulations! You have so much to look forward to, and so much that must be done. It is easy to feel overwhelmed when you look at the extensive list of responsibilities that fall on your shoulders. Here is a guide that breaks the list into manageable pieces so you can enjoy your new endeavour.
Decide on Your Business Structure
There are four main business structures in Australia. Each has advantages and disadvantages for you to consider:
Sole Trader – Using the sole trader business structure means that one individual (usually you) is the business owner and is responsible for all legal aspects of the company.
- Pros of the Sole Trader Structure
- You are entirely in control of business decisions and operations
- There are few tax and legal formalities
- You receive all of the profits
- Cons of the Sole Trader Structure
- You are personally liable for debts your business incurs, which means your assets could be at risk in the event of an unforeseen calamity.
Partnership – When you and one or more people come together to run a business, you share the legal responsibilities for your business.
- Pros of a Partnership
- Simple and inexpensive to set up
- Usually easier to raise capital
- Easy to dissolve and recover your stake in the business
- Cons of a Partnership
- You are responsible for your partner’s shortcomings
- You and your partners are personally responsible for the business’ debts
A company – Is an entity with a separate legal existence from its shareholders. Frequently, the words business and company are used interchangeably. However, in terms of legal business structure, there is a difference.
- Pros of a Company
- A good choice for high-risk ventures
- Typically, it is easy to raise capital
- You cannot be personally liable for debts
- Cons of a Company
- Your sphere of control over the company is limited
- More expensive to maintain
Trust – When you establish a company as a trust, it is in your hands for the benefit of a third party.
- Pros of a Trust
- You can protect your assets
- You have fewer liabilities
- Cons of a Trust
- You cannot distribute losses
- Expensive and complex to maintain
- Profits can incur penalty taxes
Choose the Type of Business You Will Run
There are many kinds of businesses to choose from when making this decision. Consider what you plan to do and study the options that seem to work well with your choice. For example, if you sell handmade jewellery, you might want to start as an online store and perhaps consider a brick-and-mortar location later. A landscaping business would likely operate as an independent contractor.
Apply for an Australian Business Number (ABN)
An ABN is an 11-digit identification number specifically for your business. It is in your best interest to get your ABN as soon as possible. To learn how to apply for an ABN, check out the ABN guide by TaxReturn.com.au. You must have this number to move forward and:
- Register your business name
- Identify your business to other companies when ordering goods and services or sending invoices
- Claim taxes such as Goods and Services Tax (GST)
(Note if you are using the “company” structure, you must register for an Australian Company Number (ACN) and not an ABN.)
Be Clear on the Law
Depending on what your business does, you will find a multitude of laws governing your operations. Some you are likely familiar with, such as fair labour practices or adherence to building codes. Others may be unfamiliar. For instance, do you know what is necessary to comply with the most up-to-date privacy laws? Are you familiar with which, if any, environmental protection laws apply to your business? These are two of many examples of laws you are accountable for, whether you are aware of them or not. Working with a legal advisor at this point is a wise idea.
Register Your Domain Name
After you have your ABN and have successfully registered your business name, you can register your domain name. You will need this to make it easy for customers to find you and build brand authority.
Every domain name must be unique, so you must find a name, not in use by another entity. The easiest way to do this is to use a domain search. After you have a name that is not used, head to a website such as .au Domain Administration Ltd (.auDA). Here you can find links to domain registrars and get an idea of how much securing your domain name will cost.
Set Yourself Up for Financial Success
No matter what you do or how well you do it, your profits will make or break your business. Often people overestimate their financial acumen and learn painful lessons after the fact. Now is not the time to be stubbornly self-reliant. Seek financial advice from certified experts like Freedom Wealth Services, apply for grants, and do not forget about arranging for business insurance. Considering all of your hard work to get to this point, you do not want to risk losing it all. Additionally, business insurance protects you against financial loss in case of business interruption, cybercrime, and many other unforeseen yet very possible circumstances.
Be Sure Your Taxes are in Order
Having your tax situation set up correctly is vital for your business. There are various types of taxes, and your obligations will vary according to your business type, the number of employees and the benefits you offer to your employees.
Registering for taxes can be tricky. You can register on the Business Registration page. Once there, if you are unsure what to choose, you can use the site’s help tool to find the correct category. A few examples of tax types include:
- Goods and Services Tax (GST) – This tax is required if you have a turnover of AUD 75,000 or more in a year.
- Payroll Tax – This is an example of a tax, not every business must pay. States or territories administer it, and it hinges on the total wages you pay each month
- Income Tax for Businesses – Managing the income tax for your company and employees is crucial. The amount of tax you owe the ATO is calculated by your assessable income minus deductions
Consulting a tax advisor is beneficial, especially if you are starting and unsure of what you should do.
Organise Your Operation
If you have not already, you should finalise your plans with suppliers, employees, property managers, or marketing experts. If you have all of your plans in order, you will start strong and on a positive note, rather than scrambling to muddle through your first few weeks or longer.
You should also consider going online if you do not have an online feature already. You can gain a significant amount of traction by promoting yourself on social media, and arranging a well-constructed website pays off.
Protect Your Business
A crucial element you should have before you open your doors, literally or metaphorically, is your business insurance. You may not have given the idea of business insurance much thought. But when you consider all you have built and all you stand to lose, it is a critical facet in your business preparation.
There are a number of types of business insurance. Some are rather general, and others are geared for specific industries. Here are examples of a few kinds of cover that could suit your business.
- Workers Compensation Insurance – You may be familiar with this type of cover as worker’s compensation insurance. All Australian states and territories require any business with employees (full-time, part-time, or casual) to have worker’s comp.
- Motor Vehicle Insurance – While it is required if you are registering any car in Australia, separate motor vehicle insurance is something worth considering if your business has vehicles.
- Liability Insurance – Because your company can injure a third party or cause damage to the property of a third party, you should have liability insurance. This cover pays out to the injured party if you are found liable. There are several kinds of liability coverage.
- Public Liability – If you operate a business, whether from home in an office building or on a property you own, public liability insurance is a must. Any person coming into your business can sustain an injury. This cover will pay their damages if they sue you.
- Professional Indemnity Insurance – If your company offers professional advice as a part of your business, professional indemnity insurance will cover you if the advice turns out wrong.
- Products Liability Insurance – If your company makes, supplies, or sells products, you need product liability insurance. Claims usually surround injuries stemming from a product malfunction. Whatever the cause, if you sold the product, you can be held responsible for damages.
- Personal Insurance – There are several kinds of personal insurance you should consider. (Remember YOU are not covered under worker’s compensation.) Personal accident, illness, income protection, and life insurance are the most frequently purchased types of personal insurance for business owners.
No matter how cautious and vigilant you are, accidents happen every day. Do not lose all you worked so hard to build. Learn about your small business insurance options and get the protection you need.
If you are in the process of starting a business or have questions about business insurance cover, feel free to reach out to us at Grace Insurance. Our insurance professionals have assisted hundreds of people just like you. You will get the information you need to make informed choices about insurance for your business, so you know you have the coverage you need.
– There are several kinds of personal insurance you should consider. (Remember YOU are not covered under worker’s compensation.) Personal accident, illness, income protection, and life insurance are the most frequently purchased types of personal insurance for business owners.