When it comes to putting your dreams into realities, you want to make sure that you do it right from the start. Setting up a new business may sound daunting, here’s a basic guide to help get your business off the ground.
1. Business Structure
The first legal requirement you will need to consider as a new business owner is to choose the business structure which best suits the needs of your business. You can choose to be a sole trader, have a partnership or register a company. There are advantages and disadvantages to the different structures which will affect your tax obligations and the safety of your personal assets. Here’s a quick glance at each of the most common business structures.
- Sole Trader
A sole trader literally means an individual running a business and you are legally responsible for all aspects of your business. This is the simplest and cheapest business structure. However, you will also be personally responsible for the liabilities of your business.
A partnership is where a business is owned by 2 or more people and the owners legally share profits, risks and losses according to the terms set out in partnership agreement.
A company is an artificial person, a separate legal entity that can incur debt, sue and be sued. Other privileges of a company are corporate tax rates and limited liability.
A trust is a fiduciary relationship where the business is controlled by a third party who has a legal duty to run the business for the benefit of someone else. Trust is generally established to provide legal protection for personal assets. The disadvantages of trusts are that they require time and money to create, and they cannot be easily revoked.
2. Business Registrations
After you have identified your business structure, you can then apply for a business/trading name, an Australian business number (ABN) and other key business registrations.
If you wish to carry on a business under a business name, you must register your business name with ASIC, unless one of the exemptions below applies. You do not need to register a business name if the entity is:
(a) an individual and the business name is the individual’s name;
(b) a registered company and the business name is the company’s name; or
(c) a partnership and the business name consists of all of the partners’ names.
3. Tax Registrations
The next step in setting up your business is to ensure that you understand your tax obligations. By knowing the right amount to pay and when to pay your busines tax, you will save time and money to avoid any late payment penalties.
It is important to know which Australian Government taxes that your business need to pay. For example, income tax, goods and services tax, capital gains tax or excise duty. Be sure to know how to report and pay your business tax.
Tips: an income tax return must be lodged each year, even if your business does not make a profit or has no tax to pay.
4. Applicable Laws
There are a number of national, state territory and local government legislations, licences, registrations or certificates that your business needs to comply with. The quickest way to find those that are applicable to your business, visit the Australian Business Licence & Information Service (ABLIS).
Alternatively, contact a lawyer, business advisor or your industry association or employer group to find out the answer.
If your business involves exclusive rights over creative and inventive projects, you will need to consider applying for intellectual property protection such as trademark, patent, or copyright.
5. Business/ Website Terms & Conditions
Depending on the nature and type of your business, your may require Business/Website Terms and Conditions, Services Agreements, Terms or Trade or a Product/Service Supply Agreement. These agreements are what you need to take your business to the next level. Your agreements should consider:
- Replacement and refund policy
- Privacy terms
- Fees and payment terms
- Termination provisions
- Dispute resolution processes
- Compliance with Australian Consumer Laws
As a business owner, you want to feel completely in control of the amazing business that you have started, and we are here to help give you that peace of mind and protect what you have built.
It is always recommended to seek legal advice when setting up your business or creating terms and conditions for your business. Our commercial lawyers specialise in setting up businesses and creating terms and conditions tailored to your business.
To get further advice call our Melbourne commercial law team on 03 9743 1333, our Perth commercial law team on 08 6183 3753 or email .