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There are many things to think about in planning and setting up a
small business. In this section I aim to open your eyes to some of the
more important items, including a few pitfalls, of which you need to be
aware. Some of these I've learnt from experience, some from professional
advisers, and some from stories I've heard from others who have set up
their own business. Later on you'll come across a link which will lead
you to organisations where you can get all the advice you need before
you proceed. If you live outside Western Australia, then check with your
State Government for local regulations.
There are several different types of entity you can establish. The simplest is sole trader, but did you know that all sole traders in Australia are liable for all debts to the full extent of their private assets? In other words, if something goes wrong even your house is on the line.
Partnerships can be just as tricky. You might start a business with a friend or relative you've known for many years. You've always trusted them. In the classes I ran I heard several tales of people being ripped off by partners they had always trusted. The moral is, if you're entering into a partnership, then get a proper agreement drawn up by a professional such as a lawyer.
Establishing a limited company protects your personal assets but, according to an accountancy firm in Perth which specialises in helping small businesses and has won awards for doing so (see links below), then a trust structure is the way to go. Again, you need to seek the advice of professionals to set up the optimum structure. A small investment from the beginning could save you substantial amounts in the future.
Running a business is all about creating and protecting wealth,
and paying a minimum amount of tax. Always bear this in mind, not just
when you start making money, but from the outset.
If you are using anything other than your name then you must register your business. Don't spend money on stationery until you are absolutely certain that your required business name is available and has been registered. You should not assume that a name is available for registration simply because it is not already registered as there are many factors affecting the availability of a name.
If you have a website, then your domain name must also be registered. If you have a trade mark to distinguish your product or service, then protect it through registration. If this extends to a trade secret, then you might want your employees to sign a confidentiality agreement.
Don't forget to obtain a tax file number from the Australian Tax Office,and any business with a turnover exceeding $75,000 per annum has to register for GST. Seek advice on whether you need to register for payroll tax, land tax and stamp duty.
Some occupations have controlling bodies under which
practitioners must be registered and all items of weighing and measuring
equipment require regular inspection. Registration is required if you
store volatile fuels.
Check with your local council if it's permissible to run a home-based business and if there are any zoning issues. Determine whether or not you need fire prevention advice, and seek advice if you need to dispose of any industrial waste.
Prior to leasing any premises, make sure you get a full
disclosure statement about the condition of and terms affecting the
premises (e.g. operating expenses). Once you've signed the lease, it's a
binding agreement, so seek advice beforehand.
Needless to say this is a very complex area. Australia has so many different rules and regulations, both at federal and state levels. The award system, under which employees are paid minimum salaries and given a minimum set of terms and conditions, is a minefield, though the Rudd Government is attempting to simplify matters.
You can save costs, as a large percentage of Australian firms
appear to do, by employing people on a casual basis initially.
This gives you a lot more flexibility. There are also government
incentives for employing apprentices and trainees. Pay attention to
recruiting and retaining the right staff, particularly if you have a
demand for skills which are in short supply.
RISKS & INSURANCE
Another complex area, and another in which professional advice should be sought, particularly as far as public liability is concerned. Insurance against fire and theft are obvious, but how much is your business dependent upon technology? Do you have a contingency plan if all you customer data is wiped out? I learnt of one business that depended totally on one supplier. When that relationship broke down, trade disappeared overnight and the business went bankrupt.
Risks can be foreseen and anticipated, though obviously not in the case of natural disasters. What happens if you fall sick? Can you afford income protection insurance?
In all cases, shop around for insurance cover, beware of any
excess clauses and, above all, protect your assets. Always seek the
advice of a professional before commencing your business.
Click here for links to relevant government agencies and other useful organisations.