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Starting a Business: What do I need to think about?
Starting a business isn’t something that should be done carelessly. It’s something that requires thought, planning, strategy, and dedication; regardless of how big or small, you intend it to be.
If you haven’t already spent time considering these things before starting a business, start asking yourself the following questions:
- What do I need to start a business?
- What do I hope to achieve by starting a business?
- How much money will I need to stay afloat?
- Do my activities constitute a hobby or business? (We’ve done two blogs on this topic)
- What are the advantages and disadvantages of starting a business?
- Have I written a business plan and marketing plan?
Thinking about starting your business?
If you are looking at starting a business, there is a process that you must go through in order to ensure you have properly set up your business. Registering your business is something that you can do yourself, and it is also free to do so. However, if you wish to start working as a registered business asap, you can pay to guarantee you are registered faster and properly. Follow the steps below to make sure you register your business correctly.
1. Choosing the right business structure
When registering your business, you will need to clearly state what type of structure you will be operating as. The business structure that you choose could determine the following:
the licenses you require
how much tax you pay
whether you’re considered an employee, or the owner of the business
your potential personal liability
how much control you have over the business
ongoing costs and volume of paperwork for your business.
There are four main business structures used by small businesses in Australia:
A sole trader (much like the name entails) is legally responsible for all aspects of their business. This means that personal assets owned by the sole trader outside of the business (purchased before or after the business was registered) may be ceased to pay off debts that were acquired by the business.
A company is a legal entity separate from its shareholders. In laymen’s terms, it operates much like a person. A company can enter into contracts, borrow money, and buy and sell assets. Generally, a company is responsible for paying any debts it’s acquired, which means that in most cases a shareholder’s personal assets are protected.
Because a company operates as it’s own legal entity, it is also subject to more complex legal and tax obligations.
A partnership is an arrangement where more than one person is responsible for all aspects of the business. A partnership is not recognised as a separate entity, which means – much like a sole trader – the partners within the partnership will be held personally responsible for all debts the business acquires.
A trust operates through a trustee, which is usually an individual and in some cases a company. The trustee operates the business on behalf of the beneficiaries of a trust. The trustee is legally liable for debts the business acquires, and my use assets within the trust to meet those debts. If the trust cannot resolve the debt, the trustee will be personally responsible for the difference.
2. Applying for an ABN
An ABN is your business unique numerical identifier. It is 11 digits long. While it doesn’t replace your TFN (tax file number), it is used for various tax and business purposes. Registering for an ABN can be done relatively easily through the Australian Business Register website.
If you are working with a business to set up your own business, ABN registry is usually handled as part of the job.
3. Registering a business name and trademark
The business name you choose will be the name that your business will be trading as. In order to register a business name, you will need to have an ABN as well as an AUSkey, both of which can be acquired through the Australian Business Register website. Once you have acquired an ABN and AUSkey, you may then apply for a business name through the ASIC website.
So what if you can’t settle on a name to trade under? Here are some things to consider if you need help figuring out your business name:
How is your business unique from competitors?
What image do you want to communicate
Are any businesses already using the name you have in mind?
Is your proposed name also available to be registered as a domain name for doing business online?
Is there any chance that your proposed name could be misunderstood?
A trademark allows you to protect and distinguish unique goods and services of your business. This means that your business will be able to restrict and maintain exclusive rights to commercial use, and licencing. As the owner of a trademark, you will also be able to sell the trademark to prospective buyers. No business within Australia will be allowed to use your trademark commercially.
A trademark is a way to legally protect a feature or combination of features unique to your business. This may include:
- any combination of these that distinguishes your product from another.
4. Registering a domain name
Once you have settled on a name for your business, it would be a good idea to register a domain name. While you may not be thinking of creating a website (many businesses are run solely through social media) it lends an extra level of credibility to your business when you are contacting people with a professional business email address.
Compare the following:
If you are looking to build a website as well as register a domain for professional email purposes, a web developer will be able to handle this for you.
5. What taxes do I need to register for?
It is absolutely crucial that you fully understand your tax obligations and that you are correctly registered to meet them. There are some tax registrations that apply to all businesses, with others being compulsory depending on your business’ type and size. There are also some registrations that aren’t required but may make your life easier.
Tax File Number (TFN) Required
Australian Business Number (ABN) Recommended
Australian Company Number (ACN) Required for Companies
Tax File Number (TFN) Required
Goods and Services Tax (GST) Required for Most Businesses
Pay as you go (PAYG)
Payroll Tax Required in certain circumstances
Fringe Benefits Tax (FBT) Required in Certain Circumstances
Your business may be subject to industry-specific taxes. If you a running a business in an industry which you suspect may be subject to unique taxes, you may give us a call to organise a free consultation; or you could visit the ATO’s official website to research.
6. Registration and licences for starting a business
Your business may also be obligated to obtain additional registrations and licences to comply with the law and industry-specific regulations. You may find it helpful to contact a legal professional to better understand what licences you need to obtain and what registrations you must apply for.
You may be able to find more information on your industry can be found here.
7. Buy or lease a business premises
Some new businesses may start out working at home, however, if you wish to lease or purchase
If you are leasing, it is important that you fully understand and agree with any and all clauses in the lease before signing your name to it. If you are looking to hire out
8. Arrange insurance for your business
The type of insurance your business is obligated to have will vary based on the type of business you are running, it’s size, structure, and industry. There are forms of insurance that all Australian Businesses are required to have including:
Workers Compensation Insurance – Helps to provide employees with compensation for workplace injury and sickness
Third Party Personal Injury Insurance – If you own a motor vehicle
Public Liability Insurance – Certain companies are required to take out public liability insurance.
Once you have done your research, and fully understand all forms of insurance you need to take out for your business you should contact insurance companies and brokers.
Check out another recent blog in this category.
Need help starting your business?