Setting up your own business is an extremely exciting prospect. But it can also be confusing and overwhelming, especially if you have no idea where to start. So let’s take a look at the basic business legal structures you need to know before setting up business in Australia.
Types of Business
Before you do anything else, you need to consider the type of business or the business structure you’ll be using. This will depend on a number of factors and there are different advantages and disadvantages to each option. Which structure you choose will affect how much tax you pay, the licences you require, your potential personal liability and many other things.
The four most common business structures in Australia are:
This is the simplest business structure. A sole trader is an individual who is solely responsible for all aspects of the business. However, you can employ others to help run your business under this structure.
Unlike a sole trader, a Company is a separate legal entity. Creating a company is a more complex process with higher set-up costs and requires more reporting overall.
You must register a company with the Australian Securities and Investments Commission and all company officers and directors must comply with all legal obligations under the Corporations Act 2001.
One of the upsides to the company structure is that owners can limit their personal liability and are generally not liable for company debts.
This is a structure for people who jointly run a business. There are two types of partnerships, General and Limited. Partnerships are also governed by different laws depending on your state or territory.
A trust is an entity that holds income or property for the benefit of others. A trust can be expensive to set up and operate. It requires a formal trust deed that outlining operations and a trustee to undertake formal yearly administrative tasks.
If you’re not sure which business structure is best for you, try this helpful tool by the Australian Government.
Once you’ve decided on your business structure, the next step is to register your business with the Government. This will involve getting an ABN (Australian Business Number) and registering your business name.
You can also register for taxes and apply for an AUSkey which is a secure login that allows you to access and send business information to the government online.
The business structure you choose will decide how your tax is payed. Getting professional advice from a specialist accountant early on in the set-up process will help you make the right decision based on your financial situation.
Getting your own head around the information will also help you throughout the process. For this, the ATO has a number of informative articles and helpful tools to guide you.
Insurance & Licences
Depending on the type of business you will be running, you may need to apply for various licences such as environmental permits or work health & safety permits. This of course will vary depending on industry and function.
Your insurance needs will also depend on your industry and business type. Generally speaking, insurance is essential in order to minimise your exposure to risk. There are many different types of insurance that will cover you for different things such as income protection, disability insurance or management liability insurance.
Some types of insurance are compulsory for certain businesses such as workers’ compensation, public liability and third party personal injury insurance.
For detailed information from the government about business insurance types, click here.
Writing a detailed and considered business plan will be key to your success. Your plan should outline your objectives, target markets, marketing output and your forecasts for sales and revenue. A thorough business plan will help you stay focused on your goals along the way but will also be invaluable when approaching lenders for business loans.
The Australian Government also have a handy guide to writing a business plan as well as templates to get you started.
Whether you’re starting as a sole trader or setting up an incorporation in Australia, navigating the legalities and paperwork of starting your own business can be overwhelming. Enlisting a support team of professionals will not only ensure that you are fulfilling all your legal obligations, but it will also give you peace of mind and make the entire process less stressful.
Commercial Lawyers are experts in this field. They can help you navigate the minefield of licensing, liability, employment, leasing agreements and much more.
If you’re unsure how to start your business and need help with the legalities, contact AV Lawyers today and ask for our Business Advisory Services in Sydney.