10 Steps To Start A Business In Australia
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Do you have a genius business idea but aren’t sure how to get it started? This is the case for many entrepreneurs with the tedious process of creating a legal business in Australia deterring many. As daunting as it may seem, getting started with your business idea is manageable, especially with our guide navigating you through every step of the way. This guide will lay out everything you need to know about starting your business, from initial business idea creation and applying with the Australian Government, through to obtaining business insurance and drafting an advertising campaign:
- Step #1: Create A Business Idea
- Step #2: Decide On Your Business Structure
- Step #3: Apply for An Australian Business Name (ABN)
- Step #4: Apply for An Australian Company Number (ACN)
- Step #5: Registering Your Business Name with ASIC
- Step #6: Applying For Goods & Service Tax (GST)
- Step #7: Sources Of Funding
- Step #8: Get Business insurance
- Step #9: Create Your Advertising Campaign
- Step #10: Invest in Accounting Software
Step #1: Create A Business Idea
In 2021, there were 4 million applications for new business ideas. Entrepreneurship is at an all-time high, especially with the COVID-19 pandemic giving numerous people plenty of free time to brainstorm the next big thing. Any innovative product or service can become a successful business. The first step is to develop a business idea and do plenty of research. Be sure consumer demand is there for your idea and track competitors to see how their business is doing. This can give you critical insight on if your business idea is feasible and there is room for profit. If you notice no consumer demand and competitors aren’t thriving, consider adjusting your product or service to ensure your business doesn’t flop.
Step #2: Decide On Your Business Structure
The next aspect to consider is your business structure. Your business structure will determine how taxes are paid and the way you go about setting up your business. There are four main business types in Australia: sole trader, partnership, company, and trust. If you are considering taking on a partner or partners, you will not be able to set up your business as a sole trader. Let’s dive into each of the business types to help you choose the right one for your next venture:
Designed for only one individual who is legally responsible for the entire business. This business type is filed on your individual return, creating minimal separation of business and personal assets. However, it remains the cheapest and easiest to set up.
Designed for two or more individuals starting the business together. Each partner will share the responsibility for the business and report their respective income or loss on the individual return. A partnership agreement is needed, and there is a greater separation of business and personal assets. However, disagreements among partners can be an issue in this structure. Be sure to pick someone who you can effectively work with to grow the business together.
Designed for complete separation of business and personal assets, with a board of directors running the company on behalf of the shareholders. However, a company is subject to different taxation rules, often being taxed at the business level, and are closely monitored by government bodies with more regulating bodies.
Designed for separation of assets, especially in succession planning. A trust appoints a trustee to oversee transactions flowing into the trust and distributed to beneficiaries; however, setup and maintenance costs are high. It's not common to see new, small business owners setting up a trust corporation.
Step #3: Apply For An Australian Business Number (ABN)
Once you have decided on a business structure, it will be time to apply for an Australian Business Number, commonly referred to as an ABN. This is an 11-digit number that the Australian Government will use to identify your business and is issued to all businesses, regardless of business structure. This is a critical step as important business returns will need this number to be filed timely and accurately. An ABN is also a requirement for you to send invoices, and should you need to, collect and pay GST (more on this below). If you've decided on a Company, you will also need to apply for an Australian Company Number - you can apply for this along with an ABN at the same time, head to Step #4 if you're setting up a Company.
Applying for your ABN early on will help avoid any business delays due to long processing times. However, the Australian Business Register claims to process all requests within 14 days, but it is never a bad idea to plan for delays. Applying for an ABN is free when using the ABR portal, so be sure to follow the link below.
Here is a glimpse into navigating the application:
First go to: https://www.abr.gov.au/business-super-funds-charities/applying-abn. Your page should look similar to the one below;
Once you click on apply, it will bring you to a disclaimer screen where you can agree and continue. After that step, your screen should look similar to this:
Here you will go through six steps: ABN entitlement, application detail, business information, associate details, the reason for application, and declaration. You will need to know your business structure and basic information to accurately complete the application.
Step #4: Apply For An Australian Company Number (ACN) If Required
New businesses set up as a company will have an additional step - to apply for an Australian Company Number, referred to as an ACN. This is a 9-digit identification number in addition to your ABN that is used for financial and legal purposes. Since companies have expanded responsibilities, such as public offerings, the Australian Securities and Investments Commission requires another identification number for their identification records. The ACN number will be used as the base for your ABN number, making it important to apply for both simultaneously. If you are set up as a sole trader or partnership, you don’t have to worry about this step. Nevertheless, if you are a company, pay close attention to the steps required to apply for your ACN.
First, head over to https://business.gov.au/registrations/register-a-company. Once you scroll to the bottom of the page, you should see something similar to the image below. Then, click on register your company.
You can also apply for GST and other tax items simultaneously using this application, which can save you some time.
The following image depicts the information you will need to complete the application. After you have all of that information, you will need to create an account, follow the prompts and pay the application fee.
Step #5: Registering Your Business Name With ASIC
You should create a business name when you are in the brainstorming stage of your business, but you also need to be sure you are correctly registering the name. You can come up with a brilliant business name, but it means nothing unless it is properly registered since the name is legally up for grabs until the Australian Government is told otherwise.
Registering your business name can be done through the Australian Government’s Business Registration Service, where you will complete other steps of the business formation process as well. You will need information from previous steps to complete the registration, such as your ABN, a tentative address for your business, and owner information. If you already have all of that information, you can follow the above steps to quickly register your business name while you apply for an ABN or ACN.
Be aware that registering a business name does not mean you own the Trademark or Copyright registrations for the name or logo.
Step #6: Applying For Goods & Service Tax (GST)
After registering your business, you should consider applying for the Goods and Service Tax, also known as GST. This tax is imposed when a business has gross income minus the GST of $75,000 or more. Most businesses will have no problem meeting this threshold, making it important to apply for early on.
If you don’t think you will meet the threshold, the GST is optional; however, having applying for voluntary GST can be seen by some to add credibility and legitimacy to your business, giving you the potential to attract new customers. Additionally, strict fines and penalties are imposed if you do reach the $75,000 threshold and have not paid in any GST. Registration can be completed online, by phone, or through a registered tax agent.
Applying online is the easiest method and can be done when you apply for an ACN or by using this link.
Step #7: Find Sources of Funding
The tedious setup process is only half the battle to getting your business up and running. Once you have a legal business formed, you will need to find sources of funding to purchase equipment and supplies to help you actually get your business off the ground. If you saved up money yourself, you won’t need to seek out other sources of funding, but if your checking accounting is low, it might be time to look into another partner or trading equity in your business. A partner that brings capital into the company can be a great way to bridge the gap in necessary funds, however, they will be entitled to any profit the business makes going forward.
On the other hand, a lender or investor is another option. A lender can issue you a traditional bank loan with a set repayment schedule, giving you needed money without compromising your ownership. Startups have a difficult time securing large funding from traditional financial institutions, which is where investors come in. Like a partner, an investor will often require percent ownership in exchange for capital. Common investor classes include angel investors, venture capitalists, and other private investors. Locating these investors can be done through online platforms, but keep in mind most lenders, investors, and partners will require a solid business plan before they infuse money into your business.
Step #8: Get Business insurance
One of the most important steps on your journey of setting up a new business is obtaining business insurance. As we touched on before, not all business types offer complete separation of business and personal assets, but even then, that's not an excuse to not secure your business with insurance. This is where an effective insurance policy comes into play to protect all of your assets. New companies are usually experimenting with different products and services, increasing the odds of a lawsuit. Check out upcover's instant quote generator to see if your business can use any of the insurance products that we offer.
Step #9: Create Your Advertising Campaign
Legal side, check. Insurance, check. Now for the fun part, advertising your new business and starting to grow it. Your business won’t flourish if people never know about it, which is why an effective advertising campaign is important. You will need to understand your target audience to properly tailor your campaigns. For example, if you are looking to attract individuals over 60 years, you wouldn’t want to focus your campaign on social media since most elders aren’t frequent flyers there. Instead, you would want to shift your marketing method to ratio or print ads to reach them. If you're new to marketing, there are a lot of valuable resources online including places like Fiverr or Upwork where you can hire marketing specialists. You can also jump online and search for marketing agencies in your local city.
Additionally, you should have a company profile on Google that clearly lays out your information when people do search for you. All businesses should have a website that describes the principal product or service and general information about your business. This can help your brand image and give consumers peace of mind that you are running a legit business. You can do this on Google Business. Common website makers for new businesses include Squarespace and Wix, both of which have simple tools to help you build your website. Again, if you'd like to search your local city for this service instead, you can.
One final thing to mention is to focus on the basics at first and don’t get too caught up in having a presence on every social media platform or digital tool. Work your strengths and be where your customers are. The only thing that really is a necessity nowadays is a website, everything else is optional dependant on your business and target market.
Step #10: Invest In Accounting Software
As money starts flowing through your bank account, it is time to invest in accounting software. Accounting software can make monthly reconciliations a breeze and provide transparency into your operations, leading to stronger business decisions. If you never reconcile the cash account, you may think you have $100,000 in the bank when you really only have $10,000. Moreover, most accounting software programs have seamless integration features, taking a majority of the data entry off your plate and giving you access to real-time data. Financial reports aid in progress tracking, indicating where changes may need to be made. Popular accounting software programs for small business owners include Xero and QuickBooks.
Taking the leap of faith and starting your own business leads to many hidden benefits, from creating generational wealth to controlling your own schedule. Nevertheless, the legal and accounting setup of your business should not be overlooked. You don’t want to get in trouble with the Australian Government before your business has a chance to take off. This guide provides an overview of the initial steps you will have to take, so be sure to pay close attention. Reach out to industry experts along the way, such as upcover for all your insurance needs. Properly insuring your business early on can prevent a total loss in the event of a lawsuit.