Whether you have your structure or not, the next thing to do is sit down with your accountant and solicitor to get advice on what to do next.
Choosing your structure is a big part of starting your business, and the right advice can make all the difference. Whatever structure you've chosen the official registration is an ABN or Australian Business Number. This is a unique number given to all Australian businesses; without it you’re not really a business, and even if you have one, you may not necessarily qualify as a business.
When it comes to taxes, depending on your chosen structure, you may need to apply for a TFN (Tax File Number), which is also done at the ABN registration phase. It is extremely important that a business has their ABN and TFN registered otherwise penalties may apply.
During the registration process of your business, you may also want to register a business name so that people know who you are; this is either done during the company setup phase or a separate business name registration, which can be done through ASIC.
You may need to register for GST, however that depends on your turnover. You can choose to voluntarily register or wait until you get close to the turnover threshold. Typically, it is your accountant who can help you with your GST registration and explain to you why you may need to register and what happens if you choose to register.
To sum up, the formal registrations required to at least get the business started are:
- Australian Business Number (ABN)
- Tax File Number (TFN)
- Business name registration
The next industry-specific steps required are as follows:
- If you’re in a trade, ensure you have the appropriate trade licence or qualification.
- If you’re in food, ensure you have the appropriate licence for the preparation and sale of food.
- If you deal in financial services, ensure you have the appropriate licence for providing financial services.
- If you are in IT, ensure you have the appropriate licence for your industry.
All businesses must hold insurance policies to ensure the business is covered for mishaps.
Perhaps the most important insurance policy that all businesses must hold is public liability insurance; then, depending on your industry, you may require additional insurances, for example:
- Indemnity insurance
- Workers’ compensation insurance
- Vehicle or capital equipment insurance
- Premises fire or flood insurance
- Premises contents insurance
Some optional insurances you may want to consider include:
- Buy/sell insurance
- Key person insurance
- Insurance to cover loss of profits
- Business overhead insurance
**For these particular types of insurance, you may need to speak with a financial adviser. However, effectively these types of insurance protect the key operators of the business in the event of death or permanent incapacitation.
Paying for all of these insurances should be done from your business bank account, so once you’ve registered at least the ABN, TFN and business name for the business, you should immediately head to your preferred bank to set up at least one new bank account specifically for your business. However, I strongly encourage you to set up two bank accounts.
- The first bank account is specifically for your trading, which means all income and business expenses should flow in and out of that account.
- The second bank account is for your tax/savings, which means that you should divert a portion of your income and/or profit on a regular basis to this account to ensure you have sufficient funds to meet the business’ tax obligations.
Success in business is as much doing the job as it is planning and understanding your finances, and if you want to ensure that you’re successful, get into the habit immediately of putting some money aside for tax. Whether you love or hate tax, get over it! It’s a necessary evil; it’s not going anywhere, so get used to it. If you plan to put some of your business income aside, then come tax time, you should be in a position to pay your tax bill.
With your formal registrations set up, your bank accounts set up and your insurances and other registrations set up, you’re almost in a position where you can start getting out there and doing what you love to do, but there’s still something missing in this picture.
Legally, all businesses (no matter what structure is chosen) have an obligation to maintain accounting records. The obligation may be as simple as ensuring you have support for what is disclosed in your tax return or BAS (Sole Traders and Partnerships) but trusts and companies also have additional obligations dictated by trust or corporations’ law.
This is where the need for a piece of accounting software comes in. I’m not trying to sell it as an accountant, I’m selling it from the perspective of logic. Having an accounting system makes life easier for everybody. It makes your life easier because you’ll be able to invoice your customers and monitor your business expenses and results whenever, wherever. It makes life easier for your accountant and bookkeeper because all the information is located in one source. We live in a wonderful age of technology, so once again, whether you love it or not, get over it and get used to it!
Technology is here to stay, so you’re better off spending some time getting used to it and taking advantage of it rather than working against it. In an age where information is transferred instantly, time is money, and if you choose to be ignorant and live in the past by not taking advantage of technology, then you’re basically on the fast track to failure.
With all of that in mind, you’re actually now ready to get started. However, you may still want to consider some other things as well:
- Are you going to build a website? If so, then you will need to register:
- A website host
- A website domain
- An email domain
- Do you have intellectual property? If so, have you considered patents and trademarks?
- You will need a specialised professional to assist with this.
So, to recap, the logical steps you would want to follow to hit the ground running are:
- Register the business structure.
- Register a business name if necessary.
- Register for an ABN and/or TFN.
- Open at least one bank account in the name of the business.
- Apply for public liability and any other insurances or registrations required for your industry.
- Set up an accounting system.
- Set up an email host and/or web host.
At this point, you’re good to go!