Starting a business can be a serious challenge.Mistakes you make during the initial steps of your entrepreneurial journey can cost you a lot later. Firstly it is important to determine if you are in business. Here are a few questions that you can ask yourself to determine if you are in business:
- Do you intend to make a profit?
- Will this activity be organised?
- Will there be a repetitive pattern? (if you are doing a once a year popcorn stand this activity is not likely to be recognised as a business but a hobby)
- Are you behaving like a business for instance have you registered your business or obtained a business name?
Once you have determined that you are running or fully intending to run a business here is a checklist to help you avoid any pitfalls and position your new business for success:
Get A Business Name
Your business name should be precise yet attention-grabbing, descriptive, and easy to remember.
Unless you are using your first and last names you will need to register your business name. My business name for instance is UFirst Bookkeepers, if I was trading as simply Bridget Chenje I would not have needed to register a business name however if I had chosen Bridget Chenje Accountants I would have needed to register the name because of the added ” Accountants” in the name.
The (Australian Securities and Investments Commission) ASIC has a tool to help you register and apply for a business name. It will also let you know if your name has already been taken.
Under the “Business Names Registration Act 2011” it is an offence to carry a business under an unregistered name.
- Apply For An ABN
Once you have established that you are running a business you can apply for an Australian Business Number (ABN).
An Australian Business Number (ABN) is an 11 digit unique identifier for your business. Once you have obtained your ABN you will need to display it on all your business dealings such as invoicing.
Once you have an ABN you are required to quote it on all your invoices. If you do not quote your ABN business making payments to you may be required to reduce the payment to you by a tax. This tax is callled the withholding tax where an ABN is not quoted. The business collecting the tax will then pay it to the ATO.At the time of writing this blog the amount of tax where a business has not quoted an ABN is currently 47%.
- Choose Your Business Structure
Choosing a business structure is probably one of the most important decisions that you will need to make for your business
A business structure is the form or way of operating that you choose for your business. All the different forms have different cost and tax obligations that come with their different levels of complexities. It is important to get expert advice when choosing a business structure.
In Australia the following are the common business structures:
- Sole Trader-This is probably the most common set up for an individual going into business for the first time. As a sole trader you are personally liable for all the debts of your business. This structure is the easiest and cheapest business structure.
- Partnership- In this structure two or more people or businesses get together to run a business
- Company- A more complex structure. You will not be responsible for all the company’s debts because the company is considered to be a legal person separate from its owners.
- Trust- An operation administered by a trustee. There are different types of Trust’s so it is important to choose a structure that bests suits your situation.
- Cooperative- A cooperative is owned by its members. The members share in all the risks, rewards profits and losses of the cooperative. There must be at least 5 members.
- Incorporated Association- This business structure is usually established for sports clubs, cultural or not for profit purposes. An incorporated association is recognised as a separate entity from its members.
- Open A Business Bank Account
You must open separate business accounts as soon as you start your business. For some of the business structures this is mandatory. A savings and a cheque account will be sufficient to start. Some financial institutions will add a business profile to your existing bank account. Find a bank that has bank feeds and integrates with cloud accounting software.
- Invest In A Transaction Tracking Software
- Make A Business Plan
Include here your business name, executive summary, business description, market analysis, product line description, marketing strategy, financial projections, and investor proposals. A business plan fosters discipline and preparedness. You’ll understand what your business is for, how to get there, and how to determine if you’re meeting your desired metrics for success.
If your business isn’t meeting its planned objectives at a given point, you are better capable of evaluating what might be going wrong if you had an initial plan. You can become flexible, too, by testing or enhancing the existing details. Having clear laid-out goals, objectives, and milestones allows you to be more focused, aware, and confident of your business’s progress.
A Bookkeeper will help you keep your books up to date so that you can focus on growing you business that is working on your business and not in it. As your business scales you will need expert advice on what accounting software and apps to use in order to streamline your process and get the maximum productivity from your business.
- Find A Tax Accountant
A Registered Tax Accountant will provide invaluable expert advice on choosing a business structure and ensuring that your business remains compliant.
- Find Your Work Space
Decide whether you need an office, warehouse inventory space, or shop space, or if you’re home-based. You can also set up a coworking space, a shared workspace that is popular with trendy businesses for its stimulating environment. At the beginning of your journey if it is not necessary avoid renting out expensive work places until your business is generating enough money to cover fixed costs such as rent.
- Obtain Your Permits And Licenses
Most industries are governed by permits and licences for instance if you want to operate as Pest Control business there are permits and licences that are mandatory. It is important to have your facts on what the requirements are in order to avoid penalties for illegally operating a business without the adequate licences or expertise.
- Apply For Insurance
Find a licenced insurance broker to determine the levels and type of insurances that your business requires.
- Take Care Of Yourself
Put in place ways to pay yourself. In some of the business structures Superannuation may not be compulsory, but it is important to set yourself up for retirement and other insurance covers. Talk to your Financial Adviser to ensure that you also setting aside some money for yourself.