Creating a business

Quick guide to creating a business

• Choose your business structure

  If you're thinking of starting a business, you’ll need to look at the advantages and disadvantages of different business structures and decide which one best suits your needs.
   
  Your business structure can determine:

  • the licenses you need
  • how much tax you pay
  • whether you're considered an employee, or the owner of the business
  • your potential personal liability
  • how much control you have over the business
  • ongoing costs and volume of paperwork for your business.

   
  You won’t be locked into one business structure for the life of your business. As your business changes, you may decide to move to a different type of business structure.
  
  The Business Registration Service contains an easy online tool which can help you decide which business structure best suits you and your business when you are ready to start.
  
  The most common types of business structures in Australia are:

  
  Sole trader

  • Only one person is responsible for all aspects of the business,
  • If the business is unable to pay its debts the owner is liable for the debt
  • Simplest business structure
  • Relatively low cost to set up
  • The owner generally makes all decisions about starting and running the business
  • Can employ people
     

  Partnership

  • Between two and 20 people can carry on business together
  • Partners are responsible for all aspects of the business,
  • If the business is unable to pay its debts the owners are liable for the debt
  • Simple business structure
  • Relatively low cost to set up
  • The owners generally make all decisions about starting and running the business
  • Can employ people

  
  Company

  • Separate legal entity (unlike a sole trader or partnership structure)
  • A company has the same rights as a person
  • Can incur debt, sue and be sued
  • Owners are called shareholders
  • Shareholders can limit their personal liability and are generally not responsible for the company’s debt
  • Need to register with Australian Securities and Investments Commission (ASIC)
  • Officers and Directors must comply with legal obligations under  the Corporations Act 2001

  
  Trust

  • A trust contains a trustee and beneficiaries
  • The trustee has an obligation to hold property or assets for the beneficiaries
  • Trustees can be one or more individuals or a company
  • A trust must contain more than one beneficiary
  • A trust doesn't carry on business on its own, it operates in conjunction with the trustee
  • A trust structure can be used by sole traders, partnerships and companies
    • Sole trader example: Jane Smith as trustee for the Smith Trust
    • Partnership example: Jane and John Smith as trustees for the Smith Trust
    • Company example: Smith Pty Ltd as trustee for the Smith Trust

  
  Co-operative

  • A member-owned business structure with at least five members
  • Allows you to pool your resources
  • All members have equal voting rights, regardless of their level of involvement or investment 
  • All members are expected to help run the cooperative.

  
  More information

• Register your Australian Business Number (ABN) or Australian Company Number (ACN)

  An Australian Business Number (ABN) is a unique 11-digit number that identifies your business to the government and community.
   
  You only need an ABN if you’re conducting business in Australia. Apply for an ABN for free at any time through the Australian Business Register website.
   
  Apply here for an ABN
   
  If you want to register your business as a company, you’ll need an Australian company number (ACN), which you obtain by applying to the Australian Securities & Investments Commission (ASIC). You’ll need to apply for your ACN before you obtain an ABN.
   
  Apply here for an ACN

• Register your business name

  Your business name is also known as your ‘trading name’ and is the name by which your business operates. In most cases this is the name that appears on any advertising, marketing material and signage that promotes your business.
   
  You need to register a business name if you conduct business under a name other than your own.
   
  It is not mandatory to register a business name. Companies, sole traders and partnerships can all choose to trade under their company or individual name, without registering a separate business name or trading name.
   
  You can register for a business name when you apply for your ABN. If you choose not to register for both at the same time you will need to go to the Australian Securities and Investments Commission (ASIC) to register your business name after you obtain your ABN.
   
  Business names are administered by the Australian Securities and Investments Commission (ASIC). Register your business name on the ASIC website, which links it to your ABN.
   
  Register your business name
   

• Register for taxes based on your business type

  Ensuring you're registered for the correct taxes is an essential step to opening your business.
   
  There are several taxes that you may need to register for, depending on the size and type of the business you're starting. Some registrations are optional, but can make life easier if you have them.
   
  If you’re a small business with an annual turnover of less than $10 million, you may be able to access small business tax concessions from the Australian Tax Office (ATO).
   
  You should be aware of the different taxes that may apply to your business and how to register for them.

  • Tax File Number (TFN)
  • Goods and Services Tax (GST)
  • Pay As You Go (PAYG) withholding
  • Payroll tax
  • Income tax
  • Income tax and deductions
  • Fringe Benefits Tax (FBT)
  • Land tax
  • Capital Gains tax
  • Excise duties
  • Stamp duty
  • Rates
  • International tax

  
  More details

• Apply the correct licences, regulations and codes of practice based on your business operations

  Having the correct licences and registrations is fundamental to your business. They allow you to operate without fear of closure from non-compliance and are the foundation to a successful business.
   
  Search the Australian Business Licence and Information Service (ABLIS) to find licences, permits, codes of practice and other registrations and regulations that apply to your business and your location. This helpful online tool will also provide you with information on any fees that may apply and any forms you may need to complete, to assist you with your business planning.

• Arrange for insurances based on your business operations

  Insurance reduces your risks and covers your financial losses should an insured risk event occur.
   
  Your business needs insurance to cover risks associated with your liabilities, assets and income.
  Insurance does not change the law or reduce your fault – it simply shifts the onus of paying for any liability from you to the insurer.
   
  The type of insurance you need will depend on your business and the industry you’re in.
   
  Depending on your business, there may be compulsory insurance, such as:
   

  • worker’s compensation insurance, if you employ people
  • third party personal insurance, for any motor vehicles you own (through vehicle registration)
  • public liability insurance, for certain types of companies and professions.

   
  There are important insurances you need to consider, even if it is not compulsory.
   
  Liability insurance protects you in cases where you are found liable for damages to others, such as:

  • a third party death or injury;
  • loss or damage of property or monetary loss as a result of your negligence;
  • damage or loss as a result of advice you gave, or your provision of unsafe products or services.

   
  You should also consider obtaining personal accident and illness insurance so you’re financially secure should any accident or illness prevent you from working.
   
  Read the details on insurance proposal forms and ensure you understand what is included and excluded from a policy.
   
  Consult an expert in the field to help you determine and obtain the cover you need.
   
  Visit the Australian Government’s business website to find out more about:
   

  • insurance and workers’ compensation
  • asset and revenue insurance
  • personal and workers’ insurance
  • liability insurance and professional indemnity.

• Understand laws about employing

  Good employees can be your greatest asset, and possibly your greatest cost. Recruiting and keeping the right people can play a big role in achieving business success, so it's important to map the skills and expertise you need.
   
  You’ll be considered an employer if you have someone working on a full-time, part-time or casual basis and:
   

  • pay the person a salary, wages or some kind of remuneration
  • tell them the hours and conditions of work
  • give them instructions on how the work is to be done and in what order.

   
  Arrangements that try to avoid your tax or other obligations, such as a cash-in-hand payment, could spark a serious dispute in the Industrial Court or under Workers Compensation legislation.
   
  Laws change frequently. As an employer, you should understand and keep up-to-date with legislation to ensure you meet your legal obligations and your responsibilities towards your employees.
   
  Visit the Australian Government’s business website to use the Taking on an employee checklist.
   

• Understand the Privacy Act and handling personal information

  The Privacy Act 1988 (Privacy Act) regulates how personal information is handled. The Privacy Act defines personal information as information or an opinion, whether true or not, and whether recorded in a material form or not, about an identified individual, or an individual who is reasonably identifiable.
   
  Common examples are an individual’s name, signature, address, telephone number, date of birth, medical records, bank account details, and commentary or opinion about a person.
   
  The Privacy Act also regulates the privacy component of the consumer credit reporting system, tax file numbers and health and medical research.