Getting Started

staying legal

Legal structures

The legal structure of your business is an important decision and has far-reaching implications. The Small Business Development Corporation (SBDC) has a free business brief on Business structures which gives a brief overview of the four most popular structures:

Sole trader
Partnership
Company
Trust

Sole Trader

The most critical thing about being a sole trader is that you are personally responsible and liable for all the activities of the business. Most small businesses start out as sole traders. However, as the business grows, it may be necessary to seek partners or investors, or form a company to meet the demand for additional funds, or skills, or to share the workload. Your accountant is the best person to guide you on which is the best legal structure for your business.

Partnership

The most critical thing about being in a partnership is being 'jointly and severally liable' at law for anything related to the business partnership - that is - a partner speaks and makes commitments for both. Although not technically necessary, it is strongly recommended that a written partnership agreement be drawn up by a solicitor. Refer to the SBDC's business brief on Partners in business for more details.

Setting up a company

A company is a separate legal entity, liable for the debts it incurs and paying tax on its income. The Australian Securities and Investment Commission (ASIC), Tel: 1300 300 630, or online: www.asic.gov.au has everything you need to know about setting up a company. Your accountant and solicitor can assist you with the process. Purchasing a shelf company (an existing company shell) is a cost effective alternative. For further information contact Shelf Companies Australia, Tel: (08) 9221 2477, or online: www.shelfco.com.au.

Trust

Depending on your personal circumstance, a trust can be useful in business and estate planning. Trusts are complex structures and you will need the advice and assistance of an accountant to set up a trust.

Registering a business name

As a sole trader or partnership in Western Australia you can operate a business under your own name/s or register a business name. It costs approximately $90 (2006) to register a name with the Business Names Branch, Department of Consumer and Employment Protection (DOCEP), tel: 1300 304 014, or online: www.docep.wa.gov.au. Registration of a business name has no legal implications other than allowing you to operate a business under that name.

Domain Names are used in web addresses to identify particular web sites. For further information contact au Domain Administration Ltd (auDA) who manages the .au domain. They are online at: www.auda.org.au.

A trademark is a letter, word, phrase, sound, smell, colour, shape, logo, picture, aspect of packaging, or any combination of these. Contact IP Australia, Tel: 1300 65 1010, or online: www.ipaustralia.com.au to register your trademark, or do a database search.

It is suggested that you select a name for your business that conveys to the client/customer what you do, eg Fast Delivery Services, On-time Printing, etc. A descriptive name reduces promotion and advertising costs. At the same time the name has to be easy to remember, but distinctive from your competitors. Names can be both trade marks and business names, company names or domain names.

Licences and Permits

Not all businesses need a licence, or a permit from the local Council, but many do. Find out if your business needs any licences, permits or occupational registrations from the SBDC's one-stop-shop: the Business Information and Licence Centre (BILC), Tel: 131 BIZ (131 249), or online: www.licence.sbdc.com.au. When you call the BILC, ask for a 'Starter's Pack' to be mailed out to you also. The Starter's Pack has various useful items such as, a business name registration form, workshop program, and list of business publications.

Codes of practice

Many industries have developed their own codes of practice. These are industry standards and guidelines concerning the way in which a business in a specific industry is conducted. For example, codes of practice would apply in the food industry, handling explosives, dangerous goods, and workplace safety regulations.

Taxation regulations

The Australian Taxation Office (ATO) requires you to declare your income from all sources and have evidence of all your deductions for expenditure incurred while operating the business. You must keep the following records for five (5)years after they are prepared, obtained, or the transaction completed:

receipts for supplies;
acquisitions and other expenses;
wages records; and
other receipts for supplies.

You may need to register or apply to the ATO for some or all of the following:

TFN tax file number
ABN Australian business number
GST goods and services tax
PAYG pay as you go
FBT fringe benefits tax
CGT capital gains tax (this is important if you are claiming some of your home costs as a tax deduction)
SGC superannuation guarantee charge

For further details contact the ATO, Tel: 13 24 78, or online: www.ato.gov.au You may be able to claim for occupancy expenses (e.g. a percentage of mortgage interest, rent, rates, insurance and repairs), and running expenses incurred if you use a dedicated portion of your home for business purposes. For specific information contact the ATO, Tel: 13 24 78.

The ATO has produced a guide looking at the tax issues that are specific to running a home-based business http://ato.gov.au/businesses/content.asp?doc=/content/43191.htm

A duty officer from the ATO is available at the SBDC's Business Information and Licence Centre for general small business assistance. Telephone the officer direct, Tel: (08) 9220 0249, or call into the Centre located at 553 Hay Street, Perth, Western Australia, for a short appointment.

Keeping records

Apart from legal requirements, information gained from well kept accurate records (book keeping) is an essential business management tool. Discipline yourself to do your paperwork on a regular basis. Your particular business may need specific records to meet your management needs. As a guide, a list of the basic books of business can be found here.