A Few Important Tips When Starting Out In A New Business (In Australia)

To start with, you need to register an ABN (which you do through the Australian Business Register - www.abr.gov.au). Registering a ABN is free if you do it directly through the ABR, or if you use a tax agent they charge a fee.

One of the things that you will need to assess is whether the Australian Tax Office (www.ato.gov.au) considers your business to be a hobby or an actual business. It is a common misconception that what defines whether you are doing a hobby or a business is a dollar value of how much you make, that is not the case.

This is copied from the ATO website as a guide to decide whether what you are doing is determined to be a business; • Is the activity being undertaken for commercial reasons?• Do you have the purpose and prospect of making a profit?• Are you regularly and repetitively undertaking the activities?• Is your activity planned, organised and carried on in a business-like manner?If you answered yes to these questions, then what you are doing is a business and you should go ahead and apply for your ABN.

ABN

BUSINESS NAME

Once you have an ABN, you can register your business name on the ASIC website (www.asic.gov.au). Choose your business name carefully so it is something that identifies your business and reflects something about what your business stands for.

You may have to register your business for GST. There are a number of things to consider, and you might find this is something to discuss with an accountant but two things to keep in mind is that in general, you legally must register for GST if you are going to take over $75,000 in sales (not profit! actual sales.) in a 12 month period (although even then, there is a little more to calculating that so check the ATO website for details). The other thing is that many large retailers will not purchase products wholesale that do not have GST on them, so if you are planning on marketing a product to retailers, then even if you are not close to the threshold, it may be beneficial for relationships with suppliers to register for GST.

GST

There are a few different business structures available, sole traders, partnerships, companies and trusts. All have different legal obligations and pay tax differently. Another thing to discuss with an accountant. At start up stage, most small businesses will start out as a sole trader.

Sole Trader – As a sole traders, you keep control of your business, and your business and personal assets are not divided, they are one in the same. This means that personal assets can be used to pay business debts. Sole traders pay tax at personal tax rates.

Partnerships – Is a business structure where two or more (up to 20, in general) people join together to own a business. A partnership is a relationship, not a separate legal entity. Each partner jointly owns all the business assets and liabilities. A legal partnership agreement needs to be created and signed. If you are in a partnership and your partner is not able to pay their share of debt, you are liable to pay it.

Company- A company is a separate legal entity capable of holding assets in its own name and conducting business in its own right. A company can also instigate legal action and have legal action taken against it. Company directors run the company (and shareholders own the company) Shareholders own the company while directors run the company. In many cases company directors are also shareholders, along with company employees.

Trust – Different to a company, a trust is not a separate legal entity. Trusts are often used in connection with running a business for the benefit of others and a trustee (which can be an individual or a company) conducts business on behalf of the members of the trust. Trusts are often used for family businesses, which allows family members to be beneficiaries without having to be involved in the running of the business.

If you are a sole trader, it's not a legal requirement to have a business bank account, however, it's probably a good idea to have a bank account set up with your business name. Some banks set business accounts up in your own name, however, in that instance, you can include your business name (or multiple business names) to the account to identify it as that business. Aside from it being best practice, it is easier to keep track of expenses and income, and it also give a more professional impression to those paying money into your account. It also gives you more options if you choose to get a POS (eftpos) system in place as some merchants will not approve applications for POS systems linked with an account in a individuals name with no business name attached to it.

CONSIDER YOUR BUSINESS STRUCTURE

CONSIDER YOUR BUSINESS STRUCTURE

GET AN ACCOUNTANT

KEEP RECORDS

LOOK INTO INSURANCE

DEVELOP A LOGO AND BRANDING

It's already been mentioned but it is worth pointing out that consulting a good small business accountant is well worth while, to advise on your structure, your record keeping and taxation information.

For tax reasons, you need to keep financial records for at least five years, but as well as that, it's important to keep information so you can use it for review and forward planning. Whether you store everything electronically or in hard copy, either way is suitable, you just need to find the method that suits you best and keep everything you need to right from the start. The more organised you are with keeping records, the easier things are to find later on when you need them.

When you start out, you need to consider if you need insurance. It totally depends on what you are doing as to what insurance you might need, some of the many options include trade stand and public liability insurance, professional indemnity, and stock insurance. Consider consulting an insurance broker to work out what you need, but do shop around as you could find princes differ vastly depending on who you go through.

Almost every new business will want a logo to identify them, whether it's just for a business card, a website, or a whole suite of marketing and customer contact materials. You can spend a small amount or a huge amount on having someone design a logo, but remember to ensure that you do not breach copyright by using someone else’s image/icon, and if you don't want others to use yours, having a logo specifically designed for your business is the first step towards not seeing it pop up at another business (compared to downloading a logo from a free website, that everyone else can download as well). You can consider trademarking your logo to further protect it from being used without permission by another business, but that can get to be a complex and expensive process. Look up the IP Australia website (www.ipaustralia.gov.au) for more information on copyright and trademarking.

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