What do I need to start a business in Australia?

Business Fundamentals: Meeting your legal obligations for business success

You’ve seen a gap in the marketplace, you’ve got a clever idea, and the thought of working for yourself sounds great. Right? But how do you begin?

In this article, we'll decipher the legal requirements that are fundamental to start-up success in Australia.

Although it might be confusing initially, understanding what you need before you start a business will provide great peace of mind. Getting these factors right will not only help you meet your obligations but can ensure you avoid fines or accidentally engaging in illegal activities.

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BUSINESS STRUCTURE

So, you have your idea and have created a product or service that meets the need you identified.

Do you have a partner? Will you go it alone? Or do you envisage an entourage of staff to help you make your dream a reality?

Different business structures have varying benefits and legal obligations.

The four most common are discussed below.

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WHICH BUSINESS STRUCTURE IS RIGHT FOR YOU?

Sole Trader

Although you can hire people to help you run your business, you are the only one ‘employed’ by it and are legally responsible for all aspects of it.

Partnership

This structure is used when two or more people want to run a business together. In this case income, debt, losses and responsibilities are shared between the partners.

Company

When you set up a company, you are creating a legal entity that is separate from yourself. As such, the company has its own rights and responsibilities.

Trust

Allocating a trustee obligates a person (or other business entity) to hold property or assets for people who benefit from it. The trustee is the one legally responsible for the operation of the business.

The Australian Government Business website has in-depth descriptions of each structure to help you determine which category suits your enterprise.

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LEGAL REQUIREMENTS AND OBLIGATIONS OF STARTING A BUSINESS

There are factors when starting a business in Australia that are not only important for your success but are vital for legality.

ABN, ACN and TFN: WHAT ARE THEY AND WHICH ONES DO I NEED?

Tax File Number (TFN)

• An Individual TFN is your personal income and tax identifier, allocated by the Australian Taxation Office (ATO).
• While a TFN is not mandatory for all citizens, without one, you will not be eligible to receive an ABN, and you will pay a higher rate of tax on any money you earn.
• All businesses also need their own Business TFN.

Australian Business Number (ABN)

• A business’ income and tax identifier, issued by the Australian Government.
• Does not replace your Individual or Business TFN.
• While there is no charge to apply for an ABN, there are costs involved with registering business names and other registrations.

Australian Company Number (ACN)

• A company’s income and tax identifier, issued by the Australian Securities and Investments Commission (ASIC)
• Has its own set of rules and reporting requirements.

ABN and ACN entitlement

• You must meet certain requirements to be eligible for an ABN or ACN.
• Follow the instructions at the Australian Business Register for an ABN and at ASIC for an ACN to ensure you are entitled to register.

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BUSINESS NAME REGISTRATION

To trade as a business in Australia, you need to register a business name. Before you register your name, you need to be issued with your ABN. This name and number become linked together to identify your business.If you haven’t already chosen a name, you can find some tips from the Australian Government here. If you do have a name in mind, you should check its availability before applying.

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TAX AND SUPERANNUATION OBLIGATIONS

You must declare any income you earn from your business activities and pay the appropriate taxes and superannuation. Understanding what taxes apply to your business will enable you to put away enough of your earnings to make the required payments and not be surprised by a tax debt at the end of the financial year.

Getting advice from an accountant or taxation specialist before embarking on your start-up journey will ensure you know what records to keep, the best ways to keep them and how to use them effectively to guide the decisions you make.

As the requirements for paying superannuation differ for each business structure, it is also essential to be aware of those that apply to you so that you can make appropriate contributions within the required timeframes.

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LICENSES AND PERMITS

In addition to the regulations listed above, there may be specific licences and permits that relate to your business activity or trading location. Securing these before you start operating will ensure you meet your obligations and don’t end up incurring costly fines.

Be aware that some authorisations are provided by the Australian Government, while others need to be secured from your local or regional council.