Starting a business checklist
Thu 17 May 2018 - 8:30 amOpinion | Startup | Tech
Starting a business can be both exciting and overwhelming – where do you start, and will it be a success? Below is my checklist for those looking forward to the challenge of starting a business.
Will it be a hobby or a business?
All businesses start as a small business and a lot of small businesses start off as hobbies. So, what is the difference? A hobby’s primary purpose is to provide enjoyment and fun. A business is primarily commercial in nature and the purpose is to make a profit. Another distinction is that a business is an activity that is planned, organised and carried out in a business-like manner. Once you have decided whether the activity you are undertaking will be a business, you should assess whether it will be viable or feasible. The Victorian government has a free booklet called ‘Planning and Starting Your Business’ – A short guide for new starters available from www.business.vic.gov.au. It includes a ten-question quiz to help you self-assess if your business idea is feasible. If a business is feasible, it is realistic and workable – not only from a financial perspective.
Have you considered the positives and negatives?
Let’s be real, starting and running a business is not all milk and honey. There are negatives attached to the venture and there are positives too.
Positives of starting a business include:
- You make your own decisions – you have some freedom.
- You choose where you work and who you work with both suppliers and customers.
- You get to run the business the way you want to.
- You hire and train the people you want and not those who are already there.
- You don’t make a payment of goodwill for an existing business.
The negatives are:
- Getting the initial funds to commence and operate a business may be difficult.
- New businesses must create a demand for their product or service.
- It may take months or years for a new business to become profitable.
- Researching, planning and establishing a business can take a long time and a lot of money.
- You are an unknown quantity – suppliers may not extend credit to you at first.
The key point is that starting a business compared with buying a business entails a lot more work, cost and research.
Have you thought about the structure?
There are three typical business structures used by new businesses:
- sole trader;
- partnership; or
- proprietary company.
Which structure you use will depend on several factors: What type of business will it be? How many people will be involved? How will the profits be shared? What will be your legal liability?
How will the tax be paid? Where do you envisage the business in the future?
What about a name for your business?
The structure you decide upon for your business will dictate how you register its name. If you wish to operate as a sole trader you can simply use your own name, e.g. Stephen Barnes Consulting, and you don’t need to register it. Any other business name (for example, Byronvale Advisors and Books by Byronvale) has to be registered.
When you register a business and company name, you have to check that the name is available to be used, unique and preferably easy to remember. Think about how it will stand out and emphasise what you do, for example Essendon Lawn Stencilling and Dyeing. Check the proposed name at the ASIC National Names Index and Australian Trade Mark Online Search System, and maybe also check the domain name availability.
Have you considered tax implications?
Successive governments promise ‘no new taxes’ and attempts are made from time to time to ‘simplify’ Australia’s tax system. But the reality is that taxation in this country is complicated, most businesses seek professional help to make sure they are compliant, but still, business owners need to be across it broadly. The tax-related matters you will need to consider are listed below.
- Tax file number (TFN)
- Australian business number (ABN)
- Goods and services tax (GST)
- Pay as you go (PAYG) withholding
- Fringe benefits tax (FBT)
- Wine equalisation tax (WET)
- Luxury car tax (LCT)
- Excise duty
- Stamp duty
- Land tax
- Payroll tax
How will you protect your intellectual property (ip)?
First of all, what is IP? Well, according to the IP industry body, IP Australia:
‘IP is the property of the mind or proprietary knowledge. It is a productive new idea you create. This can be an invention, trademark, design, brand or even the application of your idea.’
Your IP may be something as innocuous as your business name. I registered ‘Byronvale Advisors’ as a trade mark. Why? Because there was a consultant in Australia with the name Byron Vale and I did not want him to trade as Byron Vale consultant or advisor.
Registering a business name, a company or a domain name does not automatically give you the same rights as registering IP, and you may not even have the right to use that name as a trade mark. If Byron Vale had registered ‘Byron Vale’ as a trade mark, Byronvale Advisors Pty Ltd could have been prevented from trading as Byronvale Advisors, even though the company name is registered. Likewise, if I had not registered ‘Byronvale Advisors’, anyone could have registered the domain names www.byronvaleadvisors.com or www.byronvaleadvisors.com.au and there is nothing that I could have done about it.
Will you need council and planning permits or licences?
Every local council in Australia has a range of bylaws, zones and permit requirements and unfortunately these are not standardised.
Where you operate your business, the type of business and the size of business will determine the applicable council permits required. Examples of permits include:
- Building permit;
- Planning permit (for zones);
- Registration of food premises;
- Permit for tables and chairs on footpaths;
- Advertising signs; and
- Sale and serving of alcohol.
Another consideration is for home-based businesses that may require a council permit. Generally, a home-based business will not require a planning permit if:
- The home is your main place of residence.
- The total floor area used for the business is not more than 50 square metres, or one-third of the total floor area of the home.
- The business employs no more than one person who does not live there.
- The business does not use more of the property’s utilities – such as electricity, gas and water – than normal domestic usage.
- The business does not decrease the attractiveness or value of the neighbourhood, e.g. it doesn’t make excessive noise.
- Only one commercial vehicle less than two tonnes is registered to a resident on the property at any time.
- Nothing is offered for sale from the premises except goods made or repaired onsite.
- Goods are not displayed so they are not visible from outside the property.
- No vehicle is serviced, repaired or fuelled on the property.
Indigenous businesses can register as an Indigenous Corporation under the Corporations Aboriginal and Torres Strait Islander Act 2006 (CASTI Act). Under the CATSI Act, your business will operate under rules that take into account Aboriginal or Torres Strait Islander customs and traditions. You’ll also be given the ability to operate nationally (as opposed to being limited to the state or territory in which your business is registered).
Registration information made easy
OK, so there is a long list of red tape and it seems a job in itself understanding and keeping up to date with all the requirements. But the Australian government has an online service designed to help you set up, expand and manage your business. To do this go to https://account.business.gov.au/, create an Australian business account (ABA) and register free to this online service.
Your ABA connects you to your local, state and federal government business obligations. It’s delivered by a partnership of all three levels of government. You can use your ABA to:
- receive updates about changes to regulations;
- find and save the regulations that relate to your business;
- reduce your paperwork by pre-filling forms;
- apply for a range of licences online;
- keep a record of the forms you’ve submitted online;
- receive updates about new tools, events and webinars;
- be kept in the loop about ways to increase your bottom line; and
- get updates about opportunities in your industry.
What insurance will you need to take out?
Let’s face it – insurance is expensive, especially when you’re first setting up a business. Insurance, though, is important. What would happen if you were sick, lost your stock or premises in a fire or you were burgled? What would happen if someone was injured by a visitor to your premises, or your clients sustained financial loss caused by your supply of services or advice?
I advise clients to use an insurance broker for all their insurance requirements. Brokers know what insurances you need, the level of cover necessary and they obtain quotes from a range of underwriters for you. They usually offer reduced exclusions compared to what would be offered to you if you went direct to the underwriter.
Some examples of insurances your business may need are:
- Building and contents.
- Public liability.
- Professional indemnity.
- Business interruption.
- Product liability.
- Cyber insurance.
- Intellectual property insurance.
Note also that for home-based businesses, the standard home and contents insurance policies often do not adequately cover them. The public liability part becomes void when a business is started on the premises.
If you employ workers in your business and/or make yourself an employee, then you are required to have WorkCover Insurance. WorkCover Insurance may also apply to contractors and directors who may be classified as employees for WorkCover Insurance, where it is deemed the contractual arrangement is akin to an employment relationship.
About the author
Stephen Barnes is the principal of management consultancy Byronvale Advisors. He has over 25 years advising clients from new business start-ups to publicly listed companies and across a wide array of industries. He prides himself on quickly understanding the client’s business and issues, and synthesising problems to develop pragmatic solutions. He is also the author of ‘Run Your Business Better’. To find out how Stephen can help you run your business better visit www.byronvaleadvisors.com.