So, you have a great business idea, you have a plan, and you have done the research. But now the question remains, how do I really bring this idea to life?
While setting up your business is exciting, it can also be a challenging task if you are not appropriately prepared. Follow this step by step guide to get your business off the ground and running.
- 1. How do I register my business?
- 1.1 ABN registration
- 1.2 Registering your business name
- 1.3 Registering your company
- 1.4 Registering licences and permits
- 2. How should I prepare for taxes?
- 2.1 Registering your taxes
- 2.2 Keeping business records
- 2.3 Paying tax
- 2.4 What laws do I need to know?
- 3. What about my finances?
- 4. How do I protect my business?
- 5. Setting up operations
- What next?
1. How do I register my business?
The first step in setting up your business is to officially register the business. Registering your company is important to protect your brand and intellectual property, ensure your tax rate is correct, and protect yourself against fines and penalties.
Registering your business is mandatory, and can be broken down into four main steps;
- ABN Registration
- Registering your Business Name
- Registering your Company
- Attaining Licences and Permits
1.1 ABN registration
Don’t know what an ABN is? An Australian Business Number is an 11-digit number that allows the government to identify your business. All businesses require one and it provides several benefits for a company.
An ABN is free to apply for and can be done easily through the Australian Registration Service. If you are able to provide all the required details you may receive your ABN instantly upon completing the application.
1.2 Registering your business name
Registering your business name will mean it’s connected to your company’s ABN. Attain your ABN before registering your business name.
Before jumping right in and applying for your business name, you’ll want to ask yourself the following questions:
1. Is my business name available to register?
Use the Australian Business Name Check to find out if your business name has already been registered.
2. Is my business name already a registered trademark?
Use the Australian Trade Mark Search tool to find out if your business name is a registered trademark.
If you find no existing names or trademarks you will be able to register your business name. If existing names or trademarks exist, you will need to rethink and alter your name to ensure legality.
1.3 Registering your company
Before initiating the company registration process. You need to question whether your business circumstances require this step. If you are content as a sole trader, in a partnership, or in a trust this step will not apply to you. Registering your company will initiate various changes to your legal and financial responsibilities and should only be done if you are sure you want to make your business a legal entity in its own right. You can register your company here.
1.4 Registering licences and permits
Licences and permits can be given to a business depending on the type of activities they perform. You may have to attain licences and permits to do with:
• Environmental impacts of your business
• Importing and exporting
• Running your business from home
• Employing people
• Workplace health and safety
• Various industry-specific activities
It is best to visit the Australian Business Licence and Information Service website to learn the specific licences and permits your business will require.
2. How should I prepare for taxes?
Once your business is registered, it is time to prepare for your taxes. Although the tax preparation process can be long and tedious, it is important to get on top of this in the early stages. Failure to do so could result in incorrect tax rates and penalties.
2.1 Registering your taxes
Depending on your type of business, different taxes are going to apply to you. Sole trader and registered company tax systems vary, so it’s best to get familiar with the relevant tax information.
A Tax File Number (TFN) is required for this process. Sole traders are able to use their own TFN, but if you are a partnership, trust or company, a new TFN will need to be registered for the business.
2.2 Keeping business records
Implementing an effective way of keeping business records will make the tax process a lot easier. The following are several tax records that should be kept by all business owners;
- Income tax
- Sales records
- Payment records
- Purchase records
- Expenses records
- Banking records
- PAYG withholding
- Capital Gains Tax
2.3 Paying tax
With your taxes identified and your records well-kept, you are now prepared to correctly pay your taxes. Lodging a tax return must be done each year, even if you aren’t meeting any tax thresholds.
2.4 What laws do I need to know?
It’s always good to research your industry laws and guidelines to find out the scope of your duties. If you feel like your business is breaching any laws, or even in a grey area, its best to research online or seek legal consultation to ensure your business is protected and compliant.
At a fundamental level, businesses are legally obliged to have complete relevant business registrations (ABN, TFN, GST, PAYG) before commencing any business activities.
There are various Australian laws set out to protect both businesses and consumers. It is important to familiarise yourself with Australia’s Fair Trading Laws to avoid any legal dilemmas. Below are some key areas business owners should have an understanding of:
- Australian Consumer Law
- Competition and Consumer Act
- Australian standards
- Codes of Practice
We understand that it may tricky understanding legislation and we recommend that you seek legal advice if you are unsure or concerned.
3. What about my finances?
Now that your business is registered, you are tax ready and are aware of all relevant laws, it’s time to get started on managing your business finances. Management of finances has been known to determine the success of a business. Knowing how to organise your cash flow, budgets, invoices and payments are vital to ensure your business is organised can operate effectively.
3.1 Setting up a business bank account
Creating a business bank account is a legal requirement for a partnership, trust and company. If you are a sole trader this is optional but is highly recommended.
For tax reasons, a business bank account makes the process a lot easier. Separate business and personal accounts allow for easier access, documentation and viewing of your finances.
3.2 Business bookkeeping
Setting up a bookkeeping system is a common approach for many small businesses to manage their finances. Business Kitz makes it easy with our Bookkeeping and Accounting Kit for small businesses who want to ensure that they are managing their finances correctly and efficiently.
Another useful tool for any business, no matter its size, are budgets. Creating a budget will give you control over your money and will help you to achieve your monetary goals. To create an accurate budget, include the following; time frame, fixed and variable costs, revenue and expenses.
4. How do I protect my business?
Having insurance in place will protect your business and is highly recommended for all small business owners. Identifying the insurance needs of your business is the first step. You can refer to the list of insurance types below and decide which one/s you think are suitable for your business.
- Compulsory Insurance
- Personal or loss of income insurance
- Stock, products and asset insurance
- Accidents and liability insurance
- Technology and cybercrime insurance
- Industry insurance
4.2 Intellectual property
Intellectual Property, or IP, is intangible property such as patents, copyrights, social media and website content. Almost all businesses have some sort of IP but often have not acted to protect this property. This protection is important in the long run and can be a huge asset in gaining a competitive edge against rivalling companies.
If you are unsure about how to protect your IP, use our free checklist below. Alternatively, you can visit IP Australia to check and apply for trademarks, patents and rights for your business.
5. Setting up operations
Now that all the fundamentals of your business are in place, it is time to get into the hands-on part of your business structure.
5.1 Employ or contract people
If your business operations consist of daily heavy workloads, hiring employees and/or contractors is often the best solution to ensure everything runs smoothly. Take some time to invest in your business recruitment plan if you are going to hire people. Finding the best fit for your company will 9 times out of 10 be more effective than hiring the first few people who may seem okay for the role. A bad hire can become expensive for the business.
When starting out your business, contracting people can often be an easier method than employing as there are less legal obligations and liability. Australia has harsh employment laws and it is critical to your business to correctly identify contractors and employees. Without proper documentation in place, contractors may be considered as employees under Fair Work, opening you up to a range of issues that have the potential to bankrupt some small businesses.
When you are faced with a Fair Work dispute over contractor vs employee, the first place Fair Work will look is what documentation was in place (employment agreements). Use our free checklist to determine whether you are engaging an employee or a contractor. Business Kitz has a range of high-quality agreements that can assist you with this process.
5.2 Start marketing
Marketing is one of the most valuable and overlooked tools for small Australian businesses. Identify your business positioning, your target audience and create a marketing plan. These will be your first steps towards implementing marketing communications.
You should spend some time understanding what avenue will be the most optimal for you. There are a variety of advertisement methods from radio ads to social media. You budget and target market will help you determine which avenue is right for you.
Starting an Australian business can be a daunting task, with many put off by the heavy workload, documentation and legal requirements. At Business Kitz, we offer services to help reduce the headache of setting up your business.
Our Sole Trader Set-Up (Pty Ltd) and Advice Document provides clients with in depth knowledge of Sole Trader set up practices and advice on how to start your business efficiently and effectively.
If the idea of having someone guide you through the business set up interests you, book a free consultation with us today to talk about the ways we can help, or simply for a chat about you and your business.