Your business starts with an idea, something you are passionate about. But when it is time to turn that passion into your livelihood, many people are unprepared for what goes into setting up your business. And it can be daunting.
Understanding what you need to do can help you navigate starting your business and give you solid business foundations to grow from.
Business Structure
There are different business structures, and understanding how you want your business to run and your funding will shape the most suitable structure.
There are some key differences between different business structures, including tax obligations. Chatting with an accountant about your business can help us ensure you have the most suitable format. Common business structures include:
- Sole Trader
- Company
- Partnership
- Trust
- Co-operative
- Joint venture
ABN
Your ABN is an 11-digit unique Australian Business Number. You will need to have an ABN to receive payments. Applying for an ABN is a simple process through the Australian Business Register.
Business Name
If you intend to use a business name that is not your own name, you must register your name. For example, Jane Smith can run her business as a Virtual Assistant without registering her business name (she will require an ABN). However, Jane Smith Business Solutions will need to be a registered business name.
There are some parameters around what can be registered as a Business or Company name. Some key considerations when determining your Business name are:
- Is the name already in use?
- Is it registered or trademarked?
- Could it be offensive?
A business name and company name are different. When you set up a company, it becomes a legal entity and will have letters following the name that indicate the entity type. For example, Jane Smith Business Solutions Pty Ltd.
If you would like to trade as Jane Smith Business Solutions, you must register this business name.
Further, registering a business name is not the same as a trademark. If you are concerned about your Intellectual Property, it is best to chat to a trademark solicitor about trademarking your business.
Business Plan
A Business Plan helps you understand your business goals and can help shape critical decisions. If you are seeking finance, you will most likely need to present a business plan.
A Business Plan can also help you understand your priorities when making financial decisions.
Licencing and other Legal requirements
Some industries require a license to operate and may have specific regulations that you need to comply with. When setting up your business, it’s best practice to know your obligations, compliance and any costs associated with them.
Expenses such as license renewals, industry memberships, or other associated training costs to retain your accreditation should be considered in your cashflow forecast.
Registering for GST
You can register for GST at any time, and once you are registered, you will need to charge GST and complete regular Business Activity Statements.
You are generally not required to register for GST until your business has a $75,000 or more turnover. If you provide taxi, limousine or rideshare services like Uber, you must register for GST.
Registering for GST is optional if your business has a turnover of less than $75,000 per annum and you don’t meet any other criteria that would require you to register.
Insurance
Depending on your business structure and requirements, you may require insurance. An insurance broker can assist you in understanding the types of cover you may need. Some common insurance types include:
- Workers compensation (WorkCover)
- Public Liability
- Professional Indemnity Insurance
- Cyber Security
- Business premises
Understanding your Cashflow
Having a bookkeeper for the day-to-day accounts administration of your business can be beneficial. However, you should still endeavour to understand your cash flow, which is money coming in and money going out.
Understanding your cash flow empowers you to make informed financial decisions. There is some excellent account management software that streamlines your reporting to quickly check how your finances are situated.
As your accountant, we can help you audit and understand your reports as you get started. You can be confident you have easy access to the correct information to shape your decisions in the long term.
Employing Staff
Some roles may be better suited to a contractor, or that can be outsourced. Whereas other positions in your firm might be more appropriate to employed staff.
Look at the pros and cons of hiring contractors or staff to determine the most suitable option. When starting up, some businesses will engage contractors for specific tasks, and as they grow and have consistency in their workload, they will bring those roles in-house.
Even if you are a Sole Trader, you can still have employees. It is vital to make sure you meet your legal obligations when you engage employees, from knowing an applicable pay award to paying super and payroll tax. These might seem daunting, but these obligations can be streamlined in your accounts management processes when set up correctly.
Managing Your Accounts
As mentioned before, some excellent account management solutions are available and can save time and headaches. Most also have an array of integrations, so you can streamline tracking incoming and outgoing costs from various sources.
If you are registered for GST, you will need to complete a regular Business Activity Statement, called your BAS.
Getting your accountant to review your BAS before the submission is an investment that can ensure you are compliant and have declared everything correctly. This is especially important if you are managing your own account administration. Incorrect submissions may be subject to penalties. Getting it right can save you time, stress and money.
If you dread doing your accounts, you may want to consider a bookkeeper to help you out. An experienced bookkeeper will manage your accounts efficiently and pick up errors before they become an issue.
Payment Methods & Compliance
We now have different ways to take payments. As well as the traditional payments of cash, invoice and Eftpos, we now can pay online via Paypal, Afterpay, card payment gateways and even cryptocurrencies.
Each payment method will likely have a cost associated with it that you need to be aware of. There might even be international transaction fees to account for.
Making sure all your payment methods can be accurately tracked in your accounting software from the start can save you from an auditing nightmare trying to allocate or find a payment. This is especially important if you are undertaking frequent transactions from multiple customers.
Finally, if you are taking payments online or saving credit card details for memberships or recurring charges, you should be aware of all compliance obligations about how you store your clients’ data.
Terms & Conditions for your payments
Terms and conditions sometimes get overlooked. Consider if you are a service-based industry and payment is via invoice. If someone does not pay you for work that has been completed, then your terms and conditions are there to protect you.
- Do you charge interest for late payments?
- At what point will you engage a debt collector, and what will the costs in that be?
Having clear terms that you expect payments in can also help your cash flow with the expected payment dates.
You may also want to consider your refund policy and how long someone has to lodge a dispute. Again, if you don’t have comprehensive terms and conditions, it could leave you financially vulnerable in the future.
If you are considering starting a business or want to review your current structure, chat with our team about how we can help.