Deciding on a suitable structure for your new business is a crucial step of the start-up process as it can impact almost all other aspects including asset protection, tax and future opportunities. Given this, we would recommend seeking professional advice from a business adviser, accountant or lawyer before anything is signed and set in stone.
There are a variety of structures which can be used for your business including a trust, company, partnership or sole trader. Each structure has unique costs and benefits which need to be reviewed subjectively with your business and personal assets in mind. For example, a company or trust may be able to separate the business operations from your personal assets, limit your personal tax liabilities and provide legacy opportunities but these structures can also be expensive and not always the most tax-effective option.
Even after your business is well-established and trading, it’s important to regularly review the structure to ensure it is still effectively working for you and your situation.
Regardless of which structure your business is established under, a cost-effective way to protect you and your business is through insurance. An insurance broker is someone we would recommend to guide you through the insurance options available to protect your new business (and in some cases satisfy legal obligations) including public liability, professional indemnity and workers compensation.
Depending on the structure chosen for your business, you may need to register for a new Australian Business Number (ABN) and Tax File Number (TFN) through the Australian Business Register. These numbers would be unique to your business entity with the TFN used for income tax lodgements with the Australian Taxation Office (ATO) and the ABN to identify it for your customers and suppliers. Generally a TFN and ABN are applied for at the same time that your business structure is established.
Along with these initial registrations, you may also be required to apply for other ATO-regulated taxes such as goods and services tax (GST), pay as you go withholding (PAYGW) and fringe benefits tax (FBT), or state-based taxes including land tax or payroll tax. Each of these specific taxes have different registration requirements which may be applicable to your business. When starting out it’s important to understand your tax obligations, possibly seeking further advice from an accountant or other tax professional to avoid unnecessary penalties.
Following the establishment and necessary registrations of your business, you may need to seek finance before starting trade.
An initial step would be to open a bank account in the name of the business to collect customer deposits and pay suppliers. When registering the business with the Australian Business Register, it’s important to ensure all names are correct as errors can cause unnecessary delays with the bank and potentially put a pause on your operations.
If further capital is required to purchase business assets such as plant and equipment, you may wish to seek advice from a financier. A mortgage broker or financial institute representative will step you through what will be necessary to gain additional funds, likely requiring guarantees or proof of future profitability. Basically, you will need to provide evidence that the business has capacity to borrow.
Once the business structure is established and capital is in place to start trade, you should review your operating expectations.
Will you need to employ other people and if so, on what basis: casual, part-time, full-time?
As an employing business, it’s essential you understand your staff’s entitlements including pay rates, superannuation guarantee and leave. Is there a specific award in place for your industry to help guide employment conditions? Your employees will likely need to complete and sign employment contracts for your records and TFN declarations to be submitted with the ATO. Further, there will be consequential outlays including workers compensation and tax withholding obligations, along with single touch payroll (STP) reporting to monitor going forward.
Along with the administration that comes with employment, you should also consider setting up an efficient record-keeping system. These systems, often in the form of accounting software, can assist management of your payroll, invoicing and bills so everything is streamlined. These systems can provide timely information as required in the form of universal reports accepted by financial institutes, investors and other interested parties.
While there seems to be a great number of things to consider when setting up a new business, obtaining professional advice can help guide your priorities and reduce any pressure or confusion. You’ve already done the real hard work and equipped with the right information and guidance, you can set your business up for success. Our team at BLG Business Advisers are here to support you through this next stage. If you need to discuss your situation in more detail then please don’t hesitate to talk with us.