So you’ve decided to start your own business – congratulations! Setting up a company is an interesting and exciting time, but there are also a wide range of things to consider. As a business owner, you are now responsible for the various legals and finances, so we’ve put together a handy guide on what you will need to look out for.
Choosing your business structure
In Australia, there are four basic types of business structures, each of which will have different advantages and disadvantages. Your business structure will determine things like your tax rate, personality liability, required licenses and your legal set-up.
- Sole Trader: Your business is comprised of a single individual who is responsible for all aspects of the business. However, you can still employ the services of others (such as an accountant or lawyer) to assist in the running of your business.
- Partnership: Your business is run by a small group of people. As with a sole tradership, you and your business partners are responsible for all debts and aspects of the business.
- Company: Your business is a legal entity that exists separately from its owners and/or shareholders. The company will be taxed at a corporate rate and the company (not the individual) is responsible for any debts or losses.
- Trust: In this scenario, the business is managed by the trust, which is responsible for all business debts. The trustee operates the business and distributes the assets/income to the beneficiaries of the trust.
Applying for an ABN
Once you have decided on the structure of your business, you will need to apply for an ABN. This is a unique 11-digit number that you will use when dealing with the Australian Taxation Office (ATO). When registering for an ABN, you may also need to register for GST (goods and services tax), PAYG (Pay As You Go) withholding, and other obligations that will vary depending on the state your company resides in.
Registering your business
Now that you have an ABN, it’s time to register your business or company name.
If you have decided to operate as a sole trader, partnership or trust, you will be required to register your business name with the Australian Securities & Investments Commission (ASIC). The fees involved with registration are $35 for one year or $82 for three years, and you should receive confirmation within five days.
If you are operating as a company, you can register in one of two ways. Firstly, you can register through a private service provider who will handle your company application for a fee. Alternatively, you can register directly with ASIC by completing Form 201 and mailing it to them. Your registration will usually cost $479, with an annual fee of $254. Once your registration has been processed, you will automatically receive an ACN. This is a nine-digit number issued by ASIC that allows them to monitor your company’s activities.
How to get started
Setting up your business is incredibly exciting, but there are always risks to doing this yourself. If you have not correctly identified factors (such as whether you need to register for GST, what your taxation and legal obligations are, and whether you require insurance) you might land yourself in hot water. By enlisting the help of a professional, you will make vast savings in time, money, and errors. Get in touch with the team at AV Lawyers today for a free initial consultation on starting your business, or download our step-by-step infographic to help you plan your registration without all the stress.