Here are some of the questions about starting a business that come up frequently.
A: No, you don’t have to form a corporation to start a business. There are four basic business structures: sole trader, partnership, trust, and company. Most businesses start as sole traders, and then progress to becoming a partnership or a company later.
A: Your business’s name (or trading name) is what your business operates under. If you have to register a business name, it will be connected to your Australian Business Number (ABN).
If you’re the sole trader of a business, you only need to register your business’s name if it isn’t your full name. Otherwise, the legal name of your business will be your full name.
If you’re forming a partnership, you only need to register your business name if it isn’t your (and your partner’s) first and last names. A trust follows similar rules to a partnership.
If you plan on trading as a company, you’ll need to register a company name when you register your company.
A: You’ll need to find out if someone else is already using your proposed name (or a very similar name) to market similar products or services.
You can check whether your proposed business name is available through the Australian Securities and Investments Commission (ASIC) website.
If you find that your chosen name (or a very similar one) is registered as a trademark, you shouldn’t use it.
Double-check by searching online and searching local business directories. If all these avenues show no one is using your preferred business name, you should be in the clear to go ahead. If by some unfortunate chance someone else is using the same name, you can at least show that you made a serious attempt to find a match.
A: By registering your business, you’re letting the Australian Taxation Office (ATO) know that your business will have tax obligations or entitlements. The earlier you register your business and make it legal, the easier it will be to comply with any regulations further down the road.
To find out more about registering and starting your small business, see the ATO’s advice.
When starting your new business, you can register for an ABN, business name, and tax registration at the same time. You may need to get an AUSkey to have dealings online with the ATO.
Run through the business.govt.au checklist for starting a business in Australia – to be sure you’ve covered everything.
A: Yes – it will make life much easier for you and for your accountant, primarily because it allows you to separate your business income and expenses from your private income and expenses.
If you’re operating as a sole trader, there’s no legal requirement for you to open a business bank account. You can use your existing bank account that’s in your personal name. If you plan on using the same account for both business and private purposes, you have to clearly identify any personal payments or expenses in your cashbook.
However, if your business operates as a partnership, company or a trust, it must have a separate bank account for tax purposes.
This separate business account will typically be named something like, for example, ‘Dan Banfield conducting business as Dan Banfield Copyrighters.’ Your business’s bank statements are usually the prime source of information for your accountant when they put together your accounts at the end of your first year in business.
A: You can put in your own tax returns, or you can use an accountant. Ask friends already in business for recommendations, and choose an accountant who works with other small businesses. Your accountant should be able to save you money and stress by advising on what you can claim and how.
It’s also a smart idea to consult a lawyer about your business intentions, particularly if you intend to sign a lease or any legal documents. Depending on your business, a lawyer might advise you to take out public liability insurance or other forms of protection.
A: Part of the ATO’s job is to offer help and information, including to new businesses. You’ll find the Australian Tax Office website useful for answering basic questions about setting up a new business and you can phone 13 28 66 to ask business tax questions.
There’s also a handy list linking all the tax topics that might cross your path as you start up your business. If you have questions about a specific business tax topic, you should find the answers here.
A: At the risk of oversimplifying, here’s a broad outline of the differences.
A: Your accountant, business adviser or lawyer will be able to set one up for you and advise you on a suitable structure and constitution. There are some wrinkles that you need to be aware of so at least discussing your intention with an accountant or lawyer is a smart idea.
If you’re a confirmed ‘do-it-yourself’ type, then visit the ASIC website.
A: Creating a business plan is a wise idea – for several reasons. First, the research and thought you’ll have to put into writing your business plan will help you to sharpen or adjust your ideas. In addition, any lending institution that you approach for funds, such as a bank, will want evidence that you’ve done your homework and thought through your business concept.
Finally, your business plan provides a road map for your business. It lays out what you intend to do, how you intend to do it, the resources you’ll need, and your action deadlines for each stage. Your business plan forms a ‘living document’ that you can then revisit at regular intervals and modify according to your progress or changing circumstances.
A: The Business.gov.au website lists a wide variety of grants and assistance available to businesses in different sectors and points in the business lifecycle. You can even use their grantfinder search engine to find what you’re looking for.
A: The failure rate of small business start-ups is high. One major reason is lack of business skills. Therefore, yes, you should systematically set about improving your business skills.
Perhaps the most important ingredient you need to succeed is enthusiasm and drive, backed by persistence and a determination to achieve your goals no matter how much hard work is involved. But you’ll greatly improve your chances of success if you have good business skills. These include the skills to market your business in a creative and sustained way, and the skills to build and manage efficient business systems that enable the business to operate smoothly.
Many people start small businesses because they’re good at something or can offer specialist knowledge. They often fail because their other business skills are poor, or they spent little time on the ‘boring’ aspects of their business.
It seems more fun to do what you enjoy doing than to keep the book work up to date, chase debtors, invoice promptly, do a cash flow forecast, or manage tax liabilities – so these tasks are neglected and the business suffers.
Another major reason for failure is lack of experience in the chosen industry. The solution is to work in an industry before you start or buy a business in that industry – even if you have to work for low wages or just for the work experience. The idea of running a Bed & Breakfast might seem like an easy way to make money, until you’ve actually tried it and learned about the hard work and energy required.
Managing a coffee shop might seem great until you experience the long hours and pressure that hospitality work often involves. Learn about the advantages and the disadvantages of the industry you’re interested in before you take the plunge.
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