Monday, 20 May 2019
Now that you have made the decision to start your own business, the next question will be, what to do next. This can be an overwhelming time for many people, so here are some tips to make things clearer. With careful planning you can alleviate the stress related to starting your business from scratch.
Your preparation should include collecting as much information as possible about your respective market, industry, competition and target audience in your prospective business location. The more you know, the better prepared and the higher chance of you becoming a successful business.
If you aren’t sure of anything in relation to setting up your business, consult industry veterans and a professional bookkeeper in Sydney to stay on the right track and adhere to the legal obligations. To make things easier, we have created a list of the pre-requisites for starting a new business. Let us take a look.
Consult your bookkeeper, accountant and/or lawyer to identify the best solution for you to start a business
According to the Australian Department of Industries, Innovation and Science, the 4 main structures are described as follows:
A sole trader is an individual operating as a sole person. This person holds all legal and financial responsibility for the business, and you pay tax on an individual basis, i.e. tax-free threshold on the individual similar to an employee.
This may be a good low-cost starting point for your business. Many subcontractors choose this option as they it is low cost to set up and maintain and fairly easy to do accounting for. i.e. similar to what you would do for being an employee.
A company is a legal entity which is separate from shareholders.
A company can have individuals, trusts, company’s or even partnerships who are shareholders of the business. A company usually has Directors who are responsible for running the company and are legally responsible for the business, separating the shareholders who may be investors from any legal responsibility of the business.
A partnership is an association of people and/or entities running a business together but not as a company.
Shareholders can be an individual, trust or sole trader can be shareholders, but all partners are directly responsible for legal and financial responsibility for the business, there is no protection of non-active partners/shareholders like in a company.
A trust is an organisation that holds property or an income for the benefit of others.
Simply put, a Trust does not trade (i.e. buy or sell services or products), in can be a shareholder of an entity where it receives an income, but it cannot conduct business like a Sole Trader, Partnership or Company. Some examples of trusts include the following family trusts, corporate trusts, individual trust, etc…
Your business name will become the brand that will be identified by the customers. So it must be unique, memorable and should give an idea about the product or service being offered. Your trading name gives you the ability to connect with your target audience through a title.
The bookkeeper will use it for all the transactions and taxation obligations. The business name is registered with the Australian Securities & Investments Commission (ASIC) if you are setting up as a trust, sole trader or partnership. If you intend to start a company in Sydney, then you must register your company.
Partnerships, Companies and Trusts must apply for a separate ABN and Tax File Number from the ATO, as they are a separate entity which may have 1 or more individuals or entities under their banner.
You must first check that the name is not already taken and then register nationally online. If you plan to name the business after your name or your partner’s name, then there is no need to register.
Before registering a business name, check to see if the domain name is available. The last thing you want to do is have people google up your business name and go to a competitor because they have your domain name. Get your domain name registered for your website which is related to your business and boosts brand awareness. You can check online if the brand name is available and then get it registered with domain registrars.
The Australian Business Number is needed to create invoices and purchase orders and tax purposes. Your bookkeeper will enlighten you about the benefits of this unique 11-digit number which helps the government and the community to recognise your business.
It extends the advantage of claiming GST credits, energy grants credits, avoiding PAYG tax on payments received, and acquiring an Australian domain name. You can register for ABN and the business name at the same time using the Business Registration Service.
Businesses have to pay taxes, and for that, they need a Tax File Number (TFN) which is issued by the Australian Taxation Office (ATO). The type of TFN you get will depend on the structure of your organisation in Sydney. If you are a sole trader, you can use your TFN while dealing with ATO.
A sole trader doesn’t need a separate TFN as it is a business run under the individual’s tax file number.
Other business structures need a separate TFN for their business to be quoted to investment bodies which are responsible for paying interest, dividends and unit trust distributions. Your bookkeeper will need this for all matters pertaining to taxation
Once you register your business, you should look at protection of your intellectual property, i.e. logo’s, products (if a brand-new product or innovation), etc…
Consult with your IP attorney or lawyer to learn more and what you should do, but a basic overview of IP is below.
The 3 main types of IP protection include the following:
Trademarks – This is IP protection of your brand, so it can be your logo, business name, product name, etc… it is basically the visual component of your business and products, things like the text, phrase or image, where you can protect your business or product in a text format, image, in logo format or a combination of all of these.
Patents – This is IP protection of your products and can be in the form or a physical device, software, substance, method or process.
Design or Registered Design (also known as a Design Patent) – This is IP protection for a shape, configuration, pattern or ornamentation which gives you the capacity to protect, license of sell for industrial or commercial use.
You need to protect your intellectual property such as business name, logo, designs, and slogans by registering trademarks with IP Australia.
If you have invented a new product, you can get a patent to keep it safe from getting copied by competitors.
This aspect of the business will be managed by your bookkeeping company in Sydney. However, you must be aware of them as some tax registrations are dependent on the type and size of the entity whether you are located in Chatswood, Randwick, Parramatta or any other suburb of Sydney.
If you are buying or selling products or services, you may have to register for Goods and Service Tax (GST). Check with your accountant or bookkeeper to see if this is compulsory for your business or if it is beneficial in the early stages of your business.
If you give salaries and wages to your employees or team, then you have to register for Pay As You Go (PAYG) Withholding. Payroll tax needs to be submitted to the ATO on the wages paid by the owner, it is always a good practice to put this money aside each week/fortnight, so you don’t have a big bill at the end of the month/quarter which you haven’t budgeted for and affects your cash flow.
If you give your employees any fringe benefits, then you have to pay the Fringe Benefits Tax (FBT). There can be a few other taxes depending on your industry. You can visit the Australian Taxation Office to know about them or hire a professional bookkeeper to fulfil the obligations.
Insurance is equally significant for a business, insurance may cost a little extra per month, but if something goes wrong in the work place or to 1 of your clients from advice, services or products which you supplied to a client, this insurance can come in very handy to help protect your business from legal expenses or compensation which the business may need to pay.
Some of the insurance policies are mandatory for businesses whether you are located in Chatswood, Randwick, Parramatta or any other part of the country. These include Worker’s Compensation if you have employees; Public Liability and Indemnity Insurance which is required if you have staff or clients visiting your premises or you drive a vehicle which carries passengers and gives cover for a third party death or injury; and Third Party
Personal Injury and Damage Insurance is applicable if you own a vehicle. There are various others, such as personal or loss of income insurance, management liability insurance, stock insurance, returns insurance for products, accidents insurance, cybercrime insurance, etc. Your bookkeeper can guide you about the best ones which are needed for your business type
Capital is the most crucial aspect of running a new business. If you don’t have enough funds to run and market your business, you will struggle to effectively execute a successful business plan. Therefore you must identify what options you have for funding your business and what sources can you leverage to obtain the right funding at the beginning of the venture.
A start-up needs more capital than a stable business as a lot of money goes into the set-up, advertising, promotions, inventory, equipment, recruitment, marketing, consulting, training, etc. You need to have reserves of cash until you reach the breakeven point and start earning profits. Your bookkeeper will help you in determining the financial needs including grants, finding investors (if needed) and the best business bank loan options. These may include asset loans, invoice debtor finance, grants (federal, state and local), etc….
It is common knowledge that many start-ups fail in the first 2 years of starting due to poor planning and lack of finances, so getting everything organised and planned at the start is crucial for the future success of your business. If you are equipped with the right knowledge, finances, structures and have the support of experience consultants and bookkeepers, then you are leagues ahead of the competition and they will help keep you on the right track and working towards the success of your business.
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