So you're ready and raring to go with launching your new business, but you know you need an ABN - how do you get it?
What about GST? What about PAYG? Which one is the one for employees and what about my taxes? What if I want a business name?
Today we're in the second stage of the Getting Started in Small Business series. If you're really new to the idea of a business, I recommend starting with the first article about choosing a business structure.
If you know what structure you want, and you're ready to go - follow me! We're off on an adventure!
Before you get your ABN
If you've decided you want to operate as a sole trader - great! Skip to the next section, you're ready to go.
If you've decided to operate as a company, partnership or trust, there are some extra steps you need to take to cement your structure officially and legally.
Partnerships should always get a written partnership agreement - this will outline the distribution of profits (without a written agreement, all partners must share equally in profits and losses, even where one works in the business full time and the other does not) as well as any other specifics like initial contributions or assets brought into the business. You can buy partnership agreements online and they start from $220.
Companies need to register their company and receive an ACN. It's generally recommended that you set up your company through an online service that makes sure you've provided all the details you need, and sorted out all the questions like - what proportion are your shares going to be in? Are you going to have each shareholder have a different class of shares? Who will your director/s be? Which one will be the Company Secretary?
Setting up a company costs $479 for the ASIC form, and approx $150 for the online service of setting it up (which provides you with a packet of documents to enable you to set up a business bank account etc).
Trusts need to get a Trust Deed, and in most cases it's also recommended to set up a corporate trustee (a company who officially 'looks after' the trust). Setting up a corporate trustee costs the same as the company setup above, and online Trust Deeds range from approx $150-200.
All of these items are available through online brokers - it's best to register these through an accountant in order to receive advice on the set-up and structure of the business and ensure that everything is completed accurately.
Setting up these entities generally requires in depth details (name, date of birth, place of birth, address and Tax File Number are commonly required) for each beneficiary of the business - whether they're a partner, a beneficiary of a trust, or a shareholder in a company.
Registering for an ABN (and many other things)
Once you've sorted out any legal documents you need, registering for an ABN is the very first thing you need to do.
All applications for an ABN go through this portal.
There are various other registrations (all related to the Australian Taxation Office) that you complete at the same time as your ABN registration - see below for a comprehensive list.
While completing the ABN application, use your best estimates for items like your estimated turnover for GST, and other financial questions.
You will need the details of all owners/partners in the business to complete the ABN application form. If you're uncertain about any of the information or whether you need to register for any of the items below, it's best to discuss with an accountant.
Tax File Number
If you're a sole trader, you already have a tax file number - your individual tax file number simply incorporates your business income.
If you're a new partnership, company or trust, you will also need to register for a Tax File Number during the process of completing the ABN Registration form.
If your business turnover (gross income before expenses) is going to be more than $75,000, you will need to register for GST. This will also mean you need to complete Business Activity Statements (BAS) every 3 months.
If your turnover is less than $75,000, it's usually not recommended to register for GST, however there are rare occasions where it's beneficial (mostly for medical service providers).
If you intend to employ people, you will need to register for PAYG Withholding.
PAYG Withholding is the tax you will withhold from your employees wages, and pay to the ATO on their behalf. It is usually paid on the quarterly BAS, however employers who withhold more than $20,000 per year from their employees will need to complete monthly Activity Statements to report their PAYG Withholding.
Most other registrations shouldn't affect the majority of small businesses:
- Luxury Car Tax (motor vehicle dealers who collect and remit luxury car tax)
- Wine Equalisation Tax (people in the supply chain of wine production - this is calculated and reported similar to GST, but specific to businesses in the wine production business)
- Fuel Tax Credits - this is the most likely item to affect small businesses. It allows businesses to claim a credit for fuel used in manufacturing, plant and equipment, as well as heavy vehicles (trucks, tractors etc) and light vehicles used off-road (eg farm utes/vehicles etc).
do i need a business name?
Legally, an entity is only allows to trade under its registered legal name. This might look like:
- Sole Trader - A. Owner
- Partnership - X. Partner, Y. Partner & Z. Partner
- Company - Company Name Pty Ltd
- Trust - Trustee Company as trustee for The Name Trust
This can look a little clunky when it comes to marketing, websites, invoices and other items. In addition, especially if you're a sole trader, you may want to keep your name and personal details separate, or make it appear as though you're trading as a larger business.
okay, I want one - how do I get it?
If you want to trade with some sort of catchy name, or a name that provides a description of your business services (say - 'Blue Ribbon Accounting' as an example), you'll need to register a business name.
First, you'll need to check if your preferred business name is available - ASIC Connect allows you to check business name availability (for your exact match) and search organisation and business names to view similar names.
If you're setting up as a company, it's best to name your company after your business name (unless you're intending to use the company for various income streams/different businesses). If you name your company identically to how you intend to trade, you don't need to separately register a business name. Once you've locked it down as a company name, no one else will be allowed to register the same name in Australia.
For all other entities, you'll need to register your business name separately. This locks it down Australia-wide, so that no one else can trade under the same exact business name as you (there are some grandfathered business names that are state-by-state, but new names are nation-wide). It also allows you to operate as that name without needing to reveal your legal structure anywhere.
Business names cost $30 for one year, or $70 for 3 years of registration. ASIC has detailed steps on how to register a business name.
You can also register multiple names - so for example, I have Blue Ribbon Accounting and Blue Ribbon Bookkeeping both registered. You could register 'Smith Family Pharmacy' and 'Smith Family Chemist' - you can register as many names as you want or need.
Most ABN registrations go through instantly - you'll have your ABN straight away. Depending on the start-dates you selected for any other registrations like GST, and when you registered your business name, you're basically good to go almost immediately!
Getting through these registrations can be daunting, so I really encourage you to contact me if you have any questions or would like me to complete these steps on your behalf.
To make sure you don't miss out on any of the Getting Started in Small Business series, sign up for my Small Business Newsletter. And best of luck with your new business!