So you have taken the plunge to start your own business. You are excited by the prospect of ‘being your own boss’ yet you are daunted by the myriad rules and regulations involved in the process. This article aims to provide a high level summary to guide you through the process of setting up your own business.
1.1 Business plan
A well-defined business plan is vital to set your new business on the road to success. You would not engage a builder to build your dream home without a building plan, the same applies for your business. A well prepared business plan provides a blue print of your vision for the business and also demonstrates to lenders and investors (if you are aiming to raise funding) that you have a clear idea of how you envisage your business to grow.
1.2 Choosing a suitable business structure
Choosing an appropriate business structure is one of the most critical decisions in the business setup process. Factors needing consideration include set-up costs, tax obligations, ongoing administrative expenses, asset protection to name a few.
There are four structures – sole trader, partnership, trust and company structure – to choose from and which one is the most appropriate for you will depend on a variety of factors. This is a critical choice and you must consider your particular circumstances and needs before making a decision.
The dreaded legal and compliance matters
Starting a business involves various legal and compliance matters and these include but are not limited to:
a) Business Name Registration
A new national business names registration service commenced from 28 May 2012 requiring businesses to register their name with a single national register and pay a single fee, replacing the previous state based registration systems.
Business name registrations can be undertaken on the website of the Australian Securities and Investments Commission (ASIC) at www.asic.gov.au
b) Tax File Number (TFN) & Australian Business Number (ABN) Registrations
If you decide to operate your business as a sole trader, you can use your own TFN for both your business and personal dealings. A separate TFN is required when your business is a Partnership, Company or a Trust.
ABN registration is required for dealing with other businesses and to avoid having amounts withheld from payments made by your customers.
c) Goods & Services Tax (GST) Registration is compulsory if:
(i) your turnover is $75,000 or more ($150,000 or more for non-profit organisations)
(ii) you provide taxi services for fares, irrespective of what your turnover may be.
ABN and GST registrations can be undertaken online at www.abr.business.gov.au.
d) Pay As You Go(PAYG)Withholding Registration
PAYG withholding registration is required if your business has employees, makes payment to directors, makes payments to suppliers who have not quoted ABN. Further information is available on the Australian Tax Office website at www.ato.gov.au
e) State Based Registrations
If you are setting up your business in New South Wales (NSW) then information on applicable licenses, state taxes (e.g. payroll tax) and regulatory requirements is available on the NSW Trade and Investment website (http://www.business.nsw.gov.au/doing-business-in-nsw/starting-a-business) and on the website of NSW Fair Trading, www.fairtrading.nsw.gov.au
f) Other Legal and Compliance Considerations include:
(i) Conducting appropriate due diligence when acquiring an existing business and drafting an applicable sale agreement for the transaction.
(ii) How you deal with personal information of customers to ensure compliance with the Commonwealth Privacy Act, 1988.
(iii) Understanding your obligations towards customers while providing any warranty on products or services sold.
(iv) Reviewing your insurance requirements to assess what insurances your business requires to comply with legislation (e.g. Workers Compensation Insurance administered by Work Cover Authority of NSW for NSW businesses) and other applicable insurances to cover the various risks that your business will be exposed to, in the course of its operations.
If you are thinking about starting up a business, you need professional financial and legal advice. Owen Hodge Lawyers can assist you through all stages of the business cycle including setting up and signing of commercial lease, designing a compliance program based on your business structure, drafting agreements and contract, identifying and reducing the risk of breaching statutory and regulatory laws.