Steps to Starting A New Business
Written by: Canny Accounting
While there are many Australians who dream about being their own boss, the reality of setting up a business can be complex and can sometimes prove very daunting to business novices. There are several types of business structures, and their requirements will vary slightly.
As with any financial endeavour, your accountant or business advisor can be your best friend in travelling the legal, financial and logistical path to running your own business and taking charge of your financial future.
Do The Research When Starting A New Business
Market research is not just a description of what annoying people telephoning you at inconvenient times are doing, it is a valuable means of determining the viability of a new venture or endeavour. Whether your new business will be providing products or services, there are some important points to consider:
- The target audience for the product and/or service
- Need for accessibility to the physical location of the business
- Who are your main competitors, and does your product or service have a point of difference?
- Are there any significant – either in terms of cost or time – barriers to providing your product or service?
Guidance to Start a New Business… Start Bu SWOT’ing Up On The Details
A SWOT analysis is a tried and tested tool – it stands for Strengths, Weaknesses, Opportunities, and Threats.
This can be done quite simply and quickly and can give a good idea of the basic viability or otherwise of the prospective business, and some key areas to focus on. A SWOT analysis is usually included in a business plan, which will be discussed in more detail below.
Australian businesses have several different structure types, and legal requirements are different for each structure.
While the business.gov.au website (Australian Government) has helpful information, this is one area where financial/business and/or legal advice can be of assistance. As well as accounting and financial information, we provide legal services that can assist with this and with reviewing employment and contract documentation.
The most common structures are:
- Sole Trader – one person is legally responsible for all aspects of the business. While a sole trader can take on employees, a simpler way is to use contractors – they are responsible for their own superannuation and tax obligations. Sole traders pay tax at the personal rate, and lodge tax returns with their individual tax file number.
- Partnership – a partnership is comprised of two or more people who distribute income and losses between themselves. There are three diverse types of partnerships, with different legal obligations. Each state and territory have its own governing law of partnerships.
- Joint Venture – a joint venture is a partnership between two or more individuals, companies or organisations working together for one particular project or outcome, with a defined end date. Joint ventures require a legally binding document – a joint venture agreement – to be entered into by all parties. Legal advice should be sought for this document.
- Company – by law, a company is a distinct legal entity separate from its shareholders or officers. In Australia, the most common types of companies are:
- ‘Proprietary Limited’ companies (cannot raise money from the public through share issues)
- ‘Public’ listed companies (usually formed to raise or borrow public money by listing the company’s shares for trading on the stock exchange)
- Trust – a trust is a relationship where a trustee (an individual or company) carries on business for the benefit of other people (known as the beneficiaries). For instance, a trustee may continue a business for the benefit of a particular family and distribute the yearly profit to them.
Most incorporated organisations in Australia are ‘proprietary limited’ companies. These companies have shareholders, company directors and managers who are typically the same two or three people.
So… Which is the Best Structure?
Well, it depends on your circumstances! Factors that determine the best structure for you include:
- Asset Protection
- Succession Planning
Small Business Accountants Can Help…
Getting an ABN For Financial Reporting
The Australian Taxation Office issues an Australian Business Number (ABN) to identify individuals and/or organisations conducting business, that is, the provision of goods or services for payment within Australia. It is a requirement that the ABN must be included on invoices and other financial and legal documents used by the sole trader or business.
To apply for an ABN, you can either go to the Australian Business Register website or you can come and speak to our team at Canny Accounting and they can help you through the process. Through the ABR website, there is no cost to apply for an ABN or to receive one.
A Business Plan Structure Can Tell You What’s In A Name?
Getting a great, descriptive, catchy name for a new business can be quite an easy task, but registering that name may not be so easy, unfortunately. To register a business name in Australia, it cannot be the same, or similar, to any other business name that is in use in Australia.
The Australian Securities and Investment Commission (ASIC) website enables online registration of business names, and there is a facility to check whether your proposed name is available. Once registered, you can conduct your business under that name and no one else can legally use it.
When thinking about a business name, it is also a good idea to decide on email and website domain names and also to check their availability.
Avoid ‘Cost Accounting’ because Tax Matters!
As mentioned above, sole traders pay tax on the same basis as an individual. However, the other structures have different taxation requirements.
Registering for GST for businesses only becomes applicable when turnover/income within one year exceeds $75,000 unless required by law.
Enlist the Help of A Small Business Tax Accountant
As well as helping with formulating a business plan and financial forecast for the first two years of trading, most businesses, even sole traders, will benefit from retaining the services of a qualified, experienced accountant.
While smaller businesses may only require a bookkeeper for payments and transactions, an accountant can provide a wider range of financial, legal, superannuation, and taxation advice. If you do not have an accountant already on board, look for recommendations from friends and colleagues, or review services online.
And Importantly – PLAN Your Business Plan!
A business plan is a critical document for establishing and providing the viability of your great idea and helping to turn it into a going concern. There are a number of templates available online you can use, but it is a good idea to get expert help with this document as it details financial projections for at least the first two years of trading.
Financial projections are of key importance, as there are a number of financial outlays required from the outset. Obviously, if the business has employees, you must be able to meet all of the pay and entitlement requirements of those employees. You should have your accountant assist you with this aspect of the business plan.
This is just a quick overview of initial considerations to look at before establishing a business. Getting expert advice at an early stage is a sound decision, and the financial outlay will pay for itself in a noticeably short time.
Trust The Accountants Geelong Trust – Canny Group
Our team are here to help and we have been helping our clients for over 60 years and we have no intention of slowing down.
Get in touch with our team to find out how we can help you with your business to ensure that you are giving it the best opportunity from the start to succeed. Our accounting, legal and financial advisory teams can work together to guide you through all areas of business – if and when you need it.