Starting your own business can be challenging but rewarding. To achieve long-term success, meticulous planning and a clear structure are essential. To assist you in bringing your business concepts to life and achieving your entrepreneurial goals, we’ve devised a comprehensive checklist that breaks down the preliminary steps for you.     Â
Understanding Business Structures
When starting a business in Australia, one of the most important considerations you will have to make is the structure of your business. Your business structure dictates how you operate as an entity and will set standards for your tax and legal obligations.
It is essential to consider your business needs before deciding on your structure. There are various formal business structures you may choose from; the most common include:
Sole Trader
 The simplest form of business trading, a sole trader is solely responsible for all aspects of the business, including all debts and financial losses.
Pros: simple to set up and operate, autonomy over all aspects of business operations
Cons: unlimited personal liability, limited access to capitalÂ
Partnership
Made up of two or more people or entities responsible for running a business together. Three different kinds of business partnerships are categorised based on liability limitations.Â
Pros: relatively easy and inexpensive to set up, shared resources and expertise, tax advantagesÂ
Cons: unlimited liability *(unless an agreed limited partnership is in place), potential for disputes to arise between partners, shared profits
Trust
A trustee holds a business for the benefit of others (beneficiaries). A trustee can be either a person or a business responsible for income and losses.
Pros: tax advantages (income splitting and capital gains tax concessions) and asset protection
Cons: expensive and more complicated to establish and operate; the rigidity of the deed can make it difficult for businesses to adaptÂ
Registering Your Business Name
The next step is to select your business name. This name identifies your business’s customers and differentiates you from competitors.Â
Tips for choosing a business name:
- Keep it simple: choose a name that is easy to pronounce, spell, and unique
- Test it out first: ask for feedback from friends and family to determine its suitabilityÂ
- Check if it’s available: visit the Business Registration Service website to check availability
You must pay a fee depending on the length of time you want your business name registered. The fees for business registration with the Australian Securities & Investments Commission (ASIC) are:Â
- $44 for one year
- $102 for three years
Getting an Australian Business Number (ABN)
Before you apply for a business name, you must register for an Australian Business Number (ABN). This is an 11-digit unique code that identifies your business with the government and community. The application for an ABN is free, and your application outcome should arrive within 20 days.
Before beginning your application for an ABN, ensure you have gathered the required information, including:
- Your Tax File Number (TFN)
- Name of your business
- Business structure (e.g. sole trader, partnership)
- Contact details and business address
- Expected starting date of business operations
- Main business activitiesÂ
- Details of any associates (partners, directors)
Registering for Goods and Services Tax (GST)
The next step is registering for Goods and Services Tax (GST). First, check whether you are required to register for GST. After receiving your ABN, you must register for GST within 21 days.Â
As a new business, you will need to register for GST if:
Your business expects to turnover $75,000 or more (minus GST) in its first year of operation.
NOTE: If you are starting out and are not expecting to reach the threshold in your first year, it is essential to check in regularly in the following year of operations to see if this changes and apply for GST accordingly.
Reporting GST: You need to lodge a Business Activity Statement (BAS) to report your GST. Most businesses report their BAS quarterly; however, reporting dates can differ depending on your chosen reporting cycle.
Setting Up Business Banking
Your personal and business finances must be kept separate as a business owner. This is for several reasons:
- Clear financial separation helps to streamline business accounting
- Meets standards of business professionalism
- Simplifies the reporting process
- Helps to better manage cash flow, budgeting and financial planning
- Necessary to protect personal assets (applicable for only some types of business structures)Â
When selecting the right bank and account type for your business, compare fee and charge structures, transaction limitations, customer service, and online banking options. Once you’ve chosen a bank that best meets your needs, you will typically be required to submit the following documentation:
- Australian Business Number (ABN)
- Personal identification documents
- Business registration
- Business licenseÂ
- Operations agreement or partnership agreementÂ
Selecting a bank that offers online account services can enhance your business’s financial efficiency. The convenience of immediate transactions, lower fees, and advanced financial integration tools ensure your business efficiently manages its finances.Â
Understanding Tax Obligations
Pay As You GO (PAYG) withholding and instalments:
- PAYG withholding: employers must withhold tax from employee payments and pay the amount to the ATO
- PAYG instalments: businesses pay instalments towards their income liability (usually each quarter)
Business owners must also file an income tax return before the 31st of October (unless otherwise tax agent).
Business Licenses and Permits
In Australia, business licenses and permits differ depending on the industry, location, and nature of your business. Most businesses will need a general license, with industry-specific licenses for sectors such as hospitality and transport. Applications require documentation, form submissions, fees, and potential premise inspections. To determine the licenses you need to operate your business, visit online business resources such as the ABLIS website via Business Australia.Â
Setting Up Business Insurance
Your business may require certain kinds of insurance, either:Â
- By law (i.e. workers compensation insurance), or
- Because people who interact with your business may require it (i.e. public liability insurance)
Other kinds of insurance are non-compulsory but essential to reduce risk and protect your assets, customers, and employees. Compare different provider coverage options and their reputations, and seek professional advice to see what best suits your business’s needs. Choosing appropriate insurance and a reliable provider will safeguard your business and ensure longevity.Â
Record Keeping and Accounting
Maintaining accurate financial records and adhering to fundamental accounting principles are simple actions that ensure your business is compliant and financially responsible. Accounting software such as Xero and QuickBooks allows Australian business owners to actively manage their financial inflows and outflows and make smarter financial decisions.
Employment Considerations
It is important to know the difference between hiring employees and contractors, as employment agreements and laws will differ. Entering into written contracts helps define the obligations of staff and contractors and mitigates disputes arising from misunderstandings. Provide employee benefits such as leave and superannuation, following standards set by fair work.Â
Marketing and Promoting Your Business
Creating a website and social media presence can optimise your business’s reach. Implementing SEO strategies can help increase consumer engagement and visibility.
Ongoing Compliance and Management
Complete regular compliance checks and make changes to reflect updated legal requirements. Continuous evaluation of your business plan and strategic planning help define a successful long-term pathway for your business.
Start Your Business Journey Today!
Starting a business in Australia requires a careful approach to planning and operations. Key considerations include compliance requirements, business insurance protection, record keeping, and establishing an online presence.
Download our PDF checklist for setting up your own business. To keep up to date with Taxopia’s services and to receive regular business advice, subscribe to our newsletter. For any related queries, contact our experienced team at 1300 829 674 or info@taxopia.com.au. Â
