How to start a business in Australia

Starting a business can be tricky, especially if you're not sure where to begin. But that shouldn't stop your dream of owning and running your own company from becoming a reality. So, even if you're not certain where to start, this guide will take you step-by-step through the process of starting a business in Australia.

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Structuring your business

Structuring your business is the integral first step. Without knowing what kind of business you want to start, there's no way to move forward.

There are four common entities for prospective business owners who want to do business in Australia: sole trader, partnership, company or trust. You'll need to decide which structure makes sense for your business.

Sole trader

This is the most straightforward way to set up a business in Australia, with fewer startup costs, less paperwork and minimal working capital required.

But this type of entity comes with unlimited liability — which means that should you find yourself in debt, potential creditors have the right to claim against your personal and business assets.

Partnership

For this entity, you simply create a contract between one or more partners to conduct business. In a general partnership, partners manage the business together and share legal liability. With limited partnerships, general partners manage the company, while liability and other contributions are limited for other partners.

In a partnership, just like in a sole proprietorship, you are ultimately responsible for business decisions. This means that if a contract is broken, you could be financially liable.

Company

Unlike a sole proprietorship or a partnership, a corporation is not tied to specific individual owners. It's a limited liability entity, whereby the legal structure of your business is a separate entity and you assume no risk of personal liability for debts or other obligations.

Because corporations are complex and closely regulated, they are more expensive to set up.

Trust

A trust obligates a trustee to hold property or assets (such as business assets) for the benefit of others, known as beneficiaries. This trustee is responsible for the trust's operations, but you can set up another company as a trustee, providing some asset protection.

Registering your business

To become an official Australian business, you will need to register for your Australian business number (ABN), business name and goods and services (GST). You can register a business for one year or three years. After this period, it must be renewed.

You can perform all of these registrations online. However, if you prefer to do them by phone or via a registered agent, that may also be an option.

Registering for your ABN

An ABN is a unique 11-digit number used to identify your business to the government and community. You will need an ABN for various tax reasons and to apply for any form of business finance. To apply for an ABN, visit abr.gov.au.

You will need to have decided on your business structure before applying for your ABN. Applications for your ABN will vary depending on your business structure, but generally you can expect to need the following:

• Tax file number (TFN) and the TFNs of any associates (partners, directors or trustees)
• Tax agent registration number
• Professional advisor number (if applicable)
• Date your ABN is required – the date that you expect to start any business activities (e.g. buying stock). This date can't be more than six months after submitting your application
• Entity legal name – this will depend on the structure of your business and the entity name appears on all official documents/legal papers (e.g. "Pty ltd" if your business is a company or your own name if you are a sole trader)
• Business contact details, including an address, postal address, email address and telephone number
• Authorised contacts (e.g. the applicant or tax agent) – your authorised contacts must be authorised to make changes or update information on behalf of the entity
• Associate details – this will vary depending on the structure of your business
• Business activity – where your business is planning to make most of its income (e.g. agriculture, construction, investment or manufacturing)
• Business locations – you must provide business locations for all premises operated by your enterprise

Registering your business's name

Your business will usually need a name. However, if you're a sole trader, you do not need to register a name for your business unless you wish it to be something other than your own name. To register your business name, you can go to register.business.gov.au. You can usually register for a business name and an ABN at the same time.

When naming your business, it's important to consider the following:

• Whether there is an available domain name for the name (for your company website)
• How you want to initially come across to your customers?
• If any other businesses have the same or similar names?
• Is the name trademarked?
• Could the name be misunderstood? If your business is planning on becoming international, how does it translate?
• Could the name be offensive?

Registering for your GST

You can register for GST online at abr.gov.au. You can also register for GST at the same time as your ABN and business name, but please note that registering for GST is optional if your business does not meet certain criteria. It's only necessary to register for GST if your business does the following:

• Has a GST turnover (gross income minus GST) of $75,000 or more
• Expects the first year's turnover to reach the GST threshold or more in the first year of operation
• Is already active and you have reached the GST threshold ($75,000)
• Is a non-profit organisation that has a GST turnover of $150,000 per year or more
• Provides a taxi or limousine service for passengers (regardless of your GST turnover). This applies to both owner drivers and if you lease or rent a taxi. If you want to claim fuel tax credits for your business, you must also register for GST

Understanding tax when starting a business

Before you embark on starting your own business, it's a good idea to get to grips with what sort of tax payments, record keeping and exemptions you can expect:

• Small business tax guide
• A guide to keeping your tax records
• How to lodge a tax return for your business
• The instant asset tax write-off

Licensing and permits

The licensing and permits that you'll need will depend on a number of factors. This will include things such as what good or service you are planning to provide, your location and whether you are planning on hiring employees.

To find out what licensing or permits you will need for your business model, visit ablis.business.gov.au.

Understanding business insurance

Most Australian businesses require mandatory insurance. The following are the two most common types of insurance that businesses need:

1. Workers compensation insurance
2. Third party injury insurance

The type of business insurance that you require will depend on the size and structure of your business.

Frequently asked questions

• Do I need a business plan?

  It's safe to say that you will need a business plan when starting your own business. Many business finance lenders, for example, require a business plan in order for you to be eligible for finance. It's also a good measuring point for yourself to see how realistic your goals are and how successful your business will be.

• How can I finance my business?

  How you finance your business will depend on a multitude of factors. For example, are you purchasing an existing business or a business premises? Is your business a startup that requires investment? Do you require equipment for your business? Lenders often tailor loans to suit your needs, so it's a good idea to aim to be as specific as possible when looking at loan or investment options.