Starting a business is an exciting prospect for many, but there are a lot of things that need to be done in order to ensure your business starts of on the right track.
Here are some of the things that you will need in order to start your business:
Choose your business structure
The right business structure can help reduce your risk in the business as well as the taxes that you have to pay. There are three common structures to consider: you can setup as a Sole Trader as the easiest and cheapest method, though you may also consider a Partnership or Company structure in order to maximise your deductible business expenses.
Apply for an Australian Business Number (ABN)
An ABN is a unique number to identify your business to other businesses and to government bodies as the ATO. An ABN application is free and is very quick. Read more here about how an ABN benefits you.
Register your business name and trade mark
Similar to your ABN, your business name identifies you to others. You can think of your business name as a key part of your brand – if it’s easy to remember, unique and inventive, it’s likelier to get your customers to remember it! Registering a business name doesn’t prevent others from using it or a similar name, so if you are focused on protecting your brand, you may want to consider trademarking it sooner rather than later. However, do not that trademarking can be an expensive and time-consuming process, so only proceed with it when you are confident that you will have the necessary resources and activities to promote the brand recognition.
Register a website name
Today, any company that doesn’t have a website is as good as extinct. A website is prime real estate, where potential customers can find 24-7. Having a unique website name is important so that people can find you easily, and not misspell it for other websites instead.
Your website is an integral part of your marketing and branding efforts, so be sure to hire an expert website developer to help you with the setup.
What taxes do I need to register for
There are various taxes that you need to consider, such as Goods and Services Tax (GST), Fringe Benefits Tax (FBT), Pay As You Go (PAYG), and Payroll Tax. The taxes that you pay depend on your business structure, size, and nature of business, so be sure to consult with a tax advisor to not miss out on paying your taxes.
Registration and licences to Start a business
There may be a multitude of licenses and registrations that you need to acquire before starting your business, or you may risk closure due to non-compliance or other legal issues. You should check out (Australian Business License and Information Services) ABLIS to review the type of registrations and licenses your business would need.
Buy or lease a business premises
You may decide to purchase or rent a commercial property and/or equipment for your business. There are tax implications and significant impact to your cashflow, so be sure to consult with an expert to review whether your business is ready to purchase or rent, and even review the contracts to minimise or remove risks and unfair clauses.
Arrange insurance for your business
Every business deals with risks, and insurance is a key strategy in managing and even reducing these risks. There are numerous insurances to consider such as workers compensation if you employ staff, third party personal injury if you own a motor vehicle, and even public liability insurance for certain types of companies.
The important thing is to understand your options and obligations before committing to an insurance option, as you want to ensure the insurance covers enough while also not requiring an arm and a leg in cost.
Starting a business is an exciting venture, but make sure you got your bases covered from the start! To help you tick all the right boxes, contact Femia Accountants today on 9316 4500 or book a time to meet with us.
Register a Business – Sole Trader
Sole trader is the term utilised for ventures that may not generate more than 75,000 dollars in the initial year since its launch. It also signifies that a single entity owns the business, not a group of stakeholders. We have outlined below three crucial things that you need when starting up as a sole trader.
Registering an Australian Business Number (ABN)
Regardless of the business structure, you will need to register an ABN. This is particularly essential for a small-scale entrepreneur because there are taxation laws in Australia that, in a sense, limits the type of clients that he can have. To illustrate, the ABN is supposed to appear on the invoice that they will send to the clients. If it is not there and the client pays the amount on the bill, the client will have to create a separate withholding tax account for it. Because it entails more paperwork for them, different businesses may choose not to transact with a sole trader that does not have an ABN.
What’s the purpose of an ABN?
The business owner will be able to reimburse expenses he has spent for traveling for work purpose, equipment purchases, and work clothing, via tax deductions. However, when the individual has an ABN, it means that he needs to produce a full state of all the business activities the business has participated in during that year. This serves as the tax return’s counterpart.
How to begin the ABN application process?
There are three ways that you can apply for an Australian Business Number. The easiest option is through an online application, where you can simply visit the Australian Business Register (ABR) website and follow the prompts and provide the requested information.
If you are unable to go through their website, you can also contact the Australian Taxation Office (ATO) instead using the hotline 13 28 66 to obtain the physical application sheets or employ the services of a verified Tax Agent who is capable of commencing with the procedure on the client’s behalf.
What about a Tax File Number (TFN)?
Apart from the ABN, you should get a Tax File Number (TFN) so that you can include the profits from the business in your personal tax forms.
What about a Business Name?
You should carefully consider the name of the business. If you plan on using your own name as is, it does not need to be registered. But if they any other words before or after the name, or if you decide to use an invented word instead, you will need to register for your business name. This allows you to later on file for copyright and other protective measures to protect your brand from being misused by other companies.
Register a Business – Partnership
Are you an entrepreneur or a business-minded person in Australia? Are you seeking ways on how to set up a partnership business? Firstly, a business partnership is an entity that consists of two or more entrepreneurs working together towards a common business objective. Usually, all partners in this business structure are equally responsible for all liabilities including debts and any other obligations.
Setting up as a partnership can be cumbersome, especially if you do not know the requirements of such a business structure. However, with proper guidance and after gathering vital information, setting up a business partnership can be easy and relatively affordable.
Requirements for Setting up a Business Partnership
According to the Australian Business Partnership Act 1958, a partnership must not consist of more than 20 partners. After determining the number of partners that you need for your business, you should register your business name and obtain an Australian Business Number (ABN). Your business name must not infringe on already existing trademarks. You must also apply for a Tax File Number (TFN), for easy filing of tax returns with the Australian Taxation Office (ATO). If you are running an enterprise and you envisage that your business will be making a turnover of more than $75,000, then you should register for Goods and Services Tax (GST).
In business partnerships, partners share control and management of the business entity. With this in mind, it is important that when setting up the business, you should have a formal written agreement that highlights the role of each partner. The agreement should also include other key aspects such as sharing of profits and distribution of assets. A solicitor or a business lawyer will help you draw out a good agreement that covers all areas of interest.
Setting up a business partnership culminates with acquiring local authority licenses and obtaining relevant permits. Depending on your type of business, it is important that you take up an insurance policy, to protect your business from any potential risks.
What are the benefits of Business Partnerships?
1. Easy to Set Up: The steps on how to set up a partnership business are easy and require less paperwork in comparison to companies and trusts. Moreover, it is relatively easy to change structures from a partnership to a company rather than registering a company from scratch.
2. Shared Liability: In business partnerships, all partners are responsible for all liabilities including debts and any other obligations. This reduces the burden that would have been on an individual, like it is the case with sole proprietorships.
3. Wider Pool of Expertise and Capital: In a partnership structure, every member is an expert in a certain area thus giving the business a wider pool of expertise. Additionally, members contribute to the business capital, giving the business a substantial capital base
Disadvantages of business partnerships
The advantages that come with business partnerships simply outweigh the disadvantages. However, the fact that all partners have equal liability can be a disadvantage to some extent. A partner cannot transact with a third party without the approval of other partners. This may lead to a business making losses in case other partners object a particular partner from engaging in a potentially lucrative contract.
In case you are seeking ways on how to set up a partnership business in Australia, consider enlisting the services of a reliable business accountant such as Femia Accountants. From registration, tax compliance to business evaluation, we will assist you to make all the right business decisions.
Register a Business – Private Limited Company
With the fluctuating economy, it is important to know where you invest your company. One of these investment options is to build your own private limited company. But due to the notorious difficulty of some government regulations, that can be difficult. Here are some tips for you to set up your own private limited company:
So what is a private limited company? Also called by other as proprietary limited company, it is a type of small business organisation that is a legal entity on its own. This means that the law sees the organisation as separate from that of its owners as well as its board. It is different from a corporation due to its scope as corporations tend to be bigger. It is also distinct from partnerships as the latter does not have a separate legal entity. Furthermore, it is not the same as a public limited company as private limited company can’t participate in a public stock exchange.
Stability: Even when shareholders pull out their investment from the company, a private limited company is relatively safer to changes within when compared to other business organisations.
Ease of raising funds: Private limited companies have two options to raise their funds: raising their debt and through selling their shares. Compared to other business structures, both these fundraising options will also be easier.
Limited liability: One of the greatest things about private limited companies is that it is relatively secure due to the limited liability clause. This means that if a company sinks and debt will be paid, shareholders are only required to pay the percentage of their ownership. Also, the business is a legally separate entity so you are safer from lawsuits.
Legal duties of directors: Directors of the company are bound to a code that they have to follow and the rules as well as procedures are strictly enforced.
High admin costs: Private limited companies usually have high costs in their admin operations though that amount is usually lower than those of publicly traded companies.
Required public disclosure of records: Due to it being a privately held company, it is needed to disclose company records such as annual reports, annual returns and the like.
Requirements: For a privately limited company to be registered in Australia, at least one director, at least one company secretary and 1-50 non-employee shareholders need to live in the country. The company should also have a physical Australian address for them to be registered.
There are two ways to register your private limited company in Australia. The first way is directly with the Australian Securities and Investment Commission (ASIC). You just lodge a paper form in an ASIC office, complete with the corporate register documentation. Once successful you will be given a certificate of registration. The second option is to go through an ASIC registered agent so that it would be easier, such as with Femia Accountants. We can help you complete the whole process quickly and effectively.
Business Tax Deductions
Finding tax deductions are crucial for anyone filing a tax return, but for businesses, using them to help offset major profits is even more so, especially if you are just starting up.
The primary types of legally structured businesses in Australia are sole traders, partnerships and companies. Allowable tax deductions differ somewhat among the different structures, so be sure to confirm the deductions you take with a tax professional before submitting them on your return.
When your business ends up with losses instead of profits at the end of the fiscal year, you can usually carry that loss to a future tax year and claim it as a deduction then, to offset income gained in that tax year. If you are a sole trader or a partner in a partnership, you may be able to claim business losses against income besides just company earnings, for example, your salary.
You can claim deductions against almost all of the expenses you ring up in order to run your business in order to reduce your taxable income. In most situations, you can claim business operating expenses in full, for the year in which you incur them. Expenses for capital items, however, such as machinery, buildings and equipment, are normally claimed over a period of years.
It’s vital that you keep good records of the expenses you incur, and deduct, in any given year for at least five years. If your deductions are questioned and you do not have proof of these costs, tax return can be denied, or reduced by the number of items for which you have proof.
The list of individual deduction categories is long and varied. Following are some deductions that you should take care not to miss, because they can add up and be a valuable tool in keeping the annual taxes you must pay on your business in check. If you think you might be missing some of these deductions, or are not sure how to claim them, it’s best to consult a tax advisor for help. The main rule to remember is that you may not deduct any expenses against your business that are made for personal use.
Deductions for the decline in value of your capital assets, such as buildings, vehicles, furniture, machinery and equipment are valuable, recurring deductions. Double check to make sure though, that the calculations are correct for the amount you can claim for the depreciating value of such items.
Motor vehicle expenses
Depending on the business structure under which you operate, the type of vehicle you are claiming as a deduction, and whether or not you also use it for private purposes, will affect the amount of the deduction you can claim.
Overnight business travel expenses
You must maintain specific evidence for business travel, documented with receipts for everything you intend to claim.
Repairs, maintenance and replacement expenses
You can usually claim deductions for repairs to business machinery, tools or even the premises, as long as the costs are not considered capital expenses.
The salaries that you pay to employees, and yourself can be claimed as deductions against any profits in a given tax year.
R&D Tax Applications
A special tax incentive that you can utilise to offset some costs of doing eligible R&D activities. Read more about the R&D Tax here.
In summary, there are many opportunities to claim tax deductions, but few know them all. Be sure to keep track of any expenses you incur throughout the year, whether or not you think they are deductible. Then consult a tax professional like Femia Accountants, who can help you weed out the valid ones and identify additional deductions that you didn’t even know about.
Contact our office today on 9316 4500 or book a time to meet with us.