Starting a business is something many Australians aspire to do. The freedom and control of being your own boss is appealing, however the risk and complexity of starting your own business can be discouraging. Business Kitz has created a step by step guide on how to start a business in Australia.
1. Choose a business idea and do your research
Maybe the most important (and obvious) step is to decide what goods or services your business is going to sell. Are you going to be responsible for the creation of the service or goods? Or will you be a retailer that purchases from a wholesaler? We’ve all had those genius business ideas that pop into our heads when we’re in a shower, though without some market research, they’re bound to fail. Before deciding on a product or service, some key questions to ask yourself are:
- Is there a need for this product/service?
- Who is my target audience?
- How will I reach my target audience?
- Do I have the resources to support this business idea?
- How competitive is the market and how will I remain competitive?
2. Choose your business structure
Different business structures have different legal implications for tax, finances and paperwork. When starting a business, it’s important to understand the differences between business structures so that you can make the most informed decisions about which is right for you. The four types of business structures in Australia are:
Sole trader: This is one of the simplest business structures where a single person is registered as the business owner. On the plus side, you retain full ownership and control of the business which means you receive all of the profits. It’s also simple and cost-effective to set up, however as the sole trader, there is unlimited personal liability, meaning your assets are at risk.
Company: A company is a legal entity that is separate from its shareholders. This is a complicated and expensive structure to set up and operate and leaves you with little control over the company affairs. A company is a good option for high risk ventures as there is no personal liability.
Partnership: A partnership is made up of multiple partners that share profit and losses amongst themselves. Similar to a sole trader structure, it is easy and inexpensive to set up. Liability and management depends on the type of partnership and the agreement in place; generally, both partners are personally liable for any debt incurred.
Trust: A trustee is engaged to carry out business on behalf of the trust members. While it limits liability and protects personal assets, it is expensive and complicated to set up and can be difficult to change or dissolve
If you’re a first time business owner looking to start up a small low-risk business, the sole trader or partnership structure is likely going to be the most cost-effective, easy and suitable option for your business. Remember, you’re not locked into a structure and you can make changes at any time.
3. Register your business
Once you’ve figured out your business idea and the structure, you’re ready to move forward. This involves registering your business name and registering for an ABN, both of which can be done at the same time. While sole traders don’t always need an ABN, it is highly recommended, especially if you’re wanting to register a domain name to set up a website or avoid withholding tax.
Every business, regardless of structure, needs to register for a Tax File Number (TFN). Again with this, sole traders can use a personal TFN, although we recommend registering a separate TFN for the business. Other tax considerations that you may need to register for include Goods and Services Tax (GST), PAYG Withholding, Payroll Tax and Fringe Benefits Tax. If you’re a sole trader with no employees and earning under $75,000 per year, it’s likely that you won’t need to worry about any of these.
4. Consider your business finances
Starting a business can be a costly venture that requires some start-up capital, so you need to consider how you will finance your business. There are a few options available to you:
Business grants and funding: Although there are few and they can be hard to obtain, government grants do exist to provide funding for those starting a business. You can search for grants in your state here.
Personal savings: If you’ve got some savings that you don’t mind using, it can be a good way to fund your business without paying interest on loans or giving up any ownership and control.
Investors: Investors are willing to invest money into your business for a share of the profits or some ownership. For small start up businesses angel investors are a great option.
Bank loans: Getting a bank loan is a popular option for financing a business however be mindful of the interest rates and liability.
Crowdsourcing: Small businesses can gain funding from a large number of investors that typically invest small amounts. The return on investment for investors is sometimes in the form of goods and services rather than money.
You’ll also need to think about how the cash flow will be managed. There’s a variety of bank accounts and credit card options available that cater to different needs. For all business structures except sole traders, you’ll be required to separate your business and personal finance accounts (although we highly recommend doing this for sole traders too). Explore and compare different options through banking institutions to figure out which is best for your business. For more information about managing your business finances, click here.
5. Ensure your complying with legal standards
There are many different types of businesses, and with that comes different licences and permits. You can use this tool to help you understand if you’ll need any licences, permits and other compliance requirements. It’s also important to ensure that you understand fair trading, privacy and employment laws.
Starting a business can be tricky and exhausting, but we are here to make it easier. Check out Business Kitz subscription service today to access our full range of legal, commercial and employment documents to begin your business with a solid foundation that ensures compliance. If you are unsure about how to best protect yourself and your future business, our sister company, Legal Kitz can assist you. To arrange a FREE consultation with one of their highly experienced solicitors, click here today, or contact us at firstname.lastname@example.org or 1300 988 954.