Congratulations on your decision to start a new business! At this stage, you have probably completed your business plan and now have a long list of tasks to complete. Just looking at this list can be overwhelming. It can be difficult to identify which tasks to complete first.
To assist, this article identifies five very important legal tasks that should be completed before your business begins trading.
1. Decide on your business structure
The most common business structures are:
* Sole trader (ie running a business in your own name).
* Company (ie running a business via a separate legal entity).
* Partnership (ie two or more people running a business).
* Trust (ie a trustee runs the business on behalf of the trust).
Each structure has different advantages, disadvantages and set-up costs.
2. Register your business
All businesses must register for an Australian Business Number (ABN) and receive that ABN before trading. You may also have to complete other registrations before your business begins trading, depending on the circumstances. For example:
* If you have chosen a company business structure, you must first register the company with the Australian Securities & Investment Commission and receive an Australian Company Number before registering for an ABN.
* Unless you are a sole trader, your business must also register for a Tax File Number (TFN). Sole traders can generally use their own personal TFN.
* If you expect to earn at least $75,000 gross by the end of the financial year, your business may wish to register for Goods and Services Tax (GST).
* If your business will employ people, your business must register for Pay As You Go (PAYG) withholding.
3. Obtain all required licences and permits
Some businesses must hold certain licences and permits before trading. You may wish to use the free tool on the Australian Business Licence and Information Service website to identify which licences and permits your business is required to hold before it starts trading. You may also wish to make enquiries to find out how long each application will take to process. This information will help you plan the start date of your business.
4. Get your contracts in place
Your business will likely require (at minimum) a contract template for contracts between:
* your business and its clients;
* your business and its employees (if applicable); and
* your business and any independent contractors that will supply goods and services necessary to support your business’ activities.
Do not under-estimate the importance of having high quality contract templates in place. A well drafted contract is legally binding, clearly identifies the rights and obligations of each party, and operates to reduce the risk of loss, liability and disruption to your business. A poorly drafted contract may have the opposite effect on your business.
5. Know when to seek professional advice
Do not be embarrassed or afraid to seek advice from suitably qualified and experienced professionals – for example, a lawyer and an accountant - when completing the above tasks. Great professional advice is worth its weight in gold, and may not cost you as much as you expect.
Completing the above tasks will lay the foundation of your new business. A solid foundation will help your business manage risk and grow, so it is worthwhile doing all you can to make sure you get it right the first time.
Disclaimer: The above is not an exhaustive list of tasks that must be completed when establishing a business. This article as a whole does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to the reader. Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.
This Article was Written By: Jessica Kinny - Principal of Kinny Legal, a commercial law firm that operates from Sydney, Australia. She is known for providing businesses high quality, timely and cost-effective legal services.
Jessica is an experienced commercial litigator and contract law specialist. She uses her skills and experience to help businesses avoid common risks, protect their cash flow and client relationships, and take advantage of opportunities to grow. You can find out more about Kinny Legal on its website. If you found this article useful, you may also want to follow Kinny Legal on LinkedIn or Twitter. Kinny Legal regularly publishes complimentary articles that are designed to help business owners in their day to day business operations.