Last month in the first part of this article I discussed some of the planning required to successfully start up a business. This month, I will cover a number of other important issues.
Before you commence business, you will need to consider the most appropriate structure to use. The most common structures to operate a business from, include, Companies, Discretionary Trusts, Partnerships or as Sole Trader.
Things you will need to consider when choosing your structure are Tax Minimisation, Asset Protection, Capital Gains Tax Implications upon sale of your business and who your clients will be.
Once you are making money in your business and want to start accumulating investment assets, it will also be necessary to have these in an appropriate structure, most likely separate from your trading structure.
Before you commence trading you will need to make sure that you have the necessary registrations in place, such as:
- ABN & TFN, every business will need to make sure they have an Australian Business Number and a Tax File Number.
- GST, you will need to register for GST if your turnover is above $50,000. If it is below $50,000 you have the choice of being registered or not. If you do not register you cannot claim back the GST on your expenses.
- Business Name, If you are concerned about protecting your business name you may need to register it. If you have set up a company it may not be necessary.
If you will be employing staff members (including yourself) there are additional registrations that will need to be attended to.
- Withholding Tax. You will need to register to withhold tax from employee wages.
- Workcover. You will need to register to pay workcover on remuneration paid to staff members.
- Payroll Tax . Currently in Victoria, payroll tax needs to be paid on wages in excess of $550,000. Please note that every state has a different threshold for when payroll tax is imposed.
- Superannuation. You will need to ensure that superannuation is paid in respect of wages paid to employees. Remember, employees must now be offered with a choice as to what fund their superannuation is paid into.
5. Record Keeping
Before you start transacting through your business, you will need to give thought to how you keep your accounting records. There are some simple and cheap accounting programs on the market at the moment, the main ones being MYOB & Quickbooks which will allow you to record your transactions, complete Business Activity Statements and deduct tax from wages. As well, up to date and timely information is essential to monitoring the performance of your business and to compare against goals you have set.
A lot of business owners attend to their own bookkeeping, however if you don’t have the expertise or confidence you can always enlist the services of a bookkeeper. Doing this will not only allow you to spend more time on your business, it will also save you time and money with your accountant at the end of the year.
Now that you are in business, it is crucial to have the right insurances in place to protect your assets as well as your income stream. Some of the insurances to consider include:
- Income Protection Insurance
- Public Liability Insurance
- Life Insurance
A life insurance policy can also be useful in a business that has multiple owners in protecting one owner against the death of another. It should be noted however that a separate legal agreement would also need to be in place to provide all business owners with a level of security.
7. Use Professionals
In any business you will never be able to do everything yourself so it will be important to make sure you use the services of professionals, such as:
- Business Coach
- Financial Planner
- Mortgage Broker
- Insurance Broker
In summary, there are many factor to consider when going into business. The above is designed to be used as a brief guide only and does not cover everything you should consider when going into business. Before starting your own business you should ensure that you seek appropriate advice from a professional.
Paul Jenkin is a partner of the accounting firm Andresen McCarthy which specialises in providing support to small to medium sized businesses.
The Australian Small Business Blog