Starting your own company is the beginning of an exciting and rather challenging time. While you may think it is as easy as it looks, you suddenly find yourself wrapped up in a whole different situation and then wondered if you have made the right move of embarking on this a new journey.
You would start questioning the difference between obtaining an Australian Business Number (ABN) or an Australian Company Numbers (ACN), or do you really need a tax file number to begin with.
We have created a simple guide to help you through the early stages of establishing your company and help you get a brief understanding of starting your own company and start off on the right foot.
Choosing your Business and Investment Structure
The right foundation is always ideal when starting up your business. When you have the right business structure in place, you will find that you would have a better understanding of the type of business you are likely to need; be it an online business, a franchised store or just an independent worker.
There are four structures on which you can build your business in Australia:
Sole trader: When you register yourself as the sole owner of the business. That means you are responsible for all legal aspects of running the business. However, you are allowed to hire people to work for you.
Company: This is a commercial entity that has a separate legal existence to its shareholders.
Partnership: This is when more than one person or entities run a business together but not as a company.
Trust: A trust is an entity that is in control of property, income or any other assets on behalf of its beneficiaries.
Knowing the Numbers
Finance is another mind-boggling item on the list. The amount of money that you would need to start off depends on how much your set-up costs are going to be. This would mean that you would have to sit down (perhaps with a cup of coffee!) and identifying your set-up costs such as vehicles, initial stock, equipment, marketing material and any costs you pay for before starting the business.
We reckon that you should estimate how much cash you need as a buffer as this is the total you should have in the bank to cover monthly overheads, salaries and drawings; before you start making sales. A break-even and profit analysis will tell you if you will generate enough revenue in sales to cover all your costs and profit. This analysis would also help you get a loan with the bank!
Another spreadsheet that is good to have is a cash flow forecast to identify sales and expense instabilities each month. This will help you calculate and give you a rough idea on when you may have too little or too much cash.
Make it Official
There are still a number of things that you will have to do before your business can take off and open its doors for trading. When starting a business, it is important to be aware of the ongoing compliance requirements.
Australian Tax File Number (TFN)
A TFN is needed for the Australian Tax Office (ATO). If you have decided to operate as a sole trader, you can use your own personal TFN. For partnerships, companies and trusts, you would need a separate TFN, which can be done while applying for ABN.
Australian Business Number (ABN) and register your business name
You cannot legally start a business in Australia unless you own an ABN. It is a unique 11-digit number that identifies your business or organisation to the government and community. There are a lot of good reasons to have one. Having an ABN will avoid payers withholding tax from your payments and also makes it easier to deal with the ATO and register for GST and other business tax registrations such as PAYG withholding.
Australian Company Numbers (ACN)
Every company in Australia is issued with a unique, 9-digit ACN by the Australian Securities and Investments Commission (ASIC). Not all businesses will have an ACN as ASIC uses ACN to monitor company activities and examine the business structure of a company.
Company Secretarial Register
Once you have been issued with an ACN, there will be a lot of documents that you would need to keep and file during the duration of the existence and operation of your company. Such documents include:
- Company constitution,
- Register of members and/or public officer,
- Share certificates,
- Consent forms for company officeholders; and many more.
While managing your own company secretarial file can seem daunting, Freedom Accounting can take the pressure off on your behalf and assist you and your company in not only maintaining the company secretarial register, Principal Sugih Wijaya can guide you and give you appropriate advice when it comes to setting up your business.
Setting up your own business in Australia is not as hard as you think it would be. Regardless if you work out of your garage or renting a shop, starting your own business can be a satisfying journey which you do not want to miss.
Best of luck to you!