How to set up your first business
Congratulations on getting your first business going. Starting a business is exciting but can have its share of challenges, too. Here’s a handy guide to some of the most important things you need to do to get ready.
1. Decide on your business type
This should be an easy one: what do you want your business to do?
Sell a product or service? Will it be online or bricks and mortar? Contracting or freelancing? Working from home or an office? Buying into a franchise? Importing or exporting anything?
No matter what your business does, there are a lot of legal, taxation and insurance factors to think about. It’s important you’re clear on what you’re planning to do so you can research the details. Joining an industry association can be a good way to get this kind of information and become part of a professional network.
2. Choose a business structure
The most common business structures are sole trader, partnership and company (you can also form a trust).
A sole trader is one person that owns a business and has legal responsibility for its operations. You get all the profits but you’re also personally responsible for all its debts.
A partnership has more than one owner but isn’t a company. Legal liability and profits are shared between the partners.
If you start a company, you’ll be a director (in a management and operations sense) and a shareholder (in a financial sense). If the company’s registered as a Proprietary Limited entity, your financial liability as a director is limited.
A trust is a bit rarer, it’s an entity that manages and holds assets (like property or income) for a third party.
Don’t forget that you can change your structure as your business evolves, right now you’re just looking for the best one to start with.
3. Apply for an ABN or ACN
You need an ABN if you’re planning to make a profit. It's free to apply for one online. There are a few dodgy sites offering ABN applications, so make sure you go to the Australian Government page.
With your ABN you can register a business name, register for GST and invoice clients. Some companies won’t pay you for your work unless you have an ABN.
You need a Tax File Number (TFN) to apply. If you don’t have a TFN, apply for one before you try and get your ABN.
If you’re starting a company, you need an Australian Company Number (ACN) and not an ABN.
4. Register your business name
Before you tell everyone your new business name and get your flyers printed, search the ASIC database and check you business name's available.
You can’t register the same business name as someone else but you can register a similar one (like if ‘Mike’s Bakery’ is taken, you could still register ‘Mike’s Patisserie’).
It costs $36 to register your business name for a year, or $84 for three years. Make sure ASIC always have your latest contact details, if your registration expires someone else could take your business name.
To help keep copycats away or to protect something exclusive to you, trademark your business name.
5. Register for tax
Will you take more than $75,000 a year in turnover? If so, you need to register for GST. Registering also lets you claim back GST on the things you buy for your business like petrol, cars, computers and software.
If you have employees you might need to register for Pay As You Go (PAYG) tax. This helps you withhold the right amount of tax from their salaries or wages. You might also need to register for payroll tax.
Lastly, if you give your employees cars to use or credit cards for entertaining clients you might need to register for fringe benefits tax.
Once you’re registered for GST or PAYG tax, you or your accountant need to fill out a Business Activity Statement (BAS) every quarter and send it to the Tax Office.
Once you’ve gotten through all that, you’re well on your way to getting your business up and running.
There are still more things you might want to do, like:
- Register a domain name
- Build your website and add content so you show up in search engines
- Design a brand identity (choose a logo, colours, fonts and tagline)
- Think about your insurance needs (like public liability insurance or cover if you’re sick or hurt and can’t work)
- Set up social media accounts (like Facebook, Instagram or LinkedIn)
- Join a union
- Get in touch potential clients and announce your new business.