In part one of this post, “How to start your own business – Part One”, I talked about the ideas and process of planning your business out. The products, the marketing and positioning of your brand. There are so many aspects of setting up your own busines that a few blog posts aren’t going to cover it all, however I’m hoping this will be a good start. Today, we’re going to look at the technical side of starting up your own business. There are plenty of rules and regulations that you need to worry about, but at the same time, there is a lot that you DON’T have to worry about. Often, prospective small business owners approach me with a list of questions a mile long (well, not really, but you know what I mean) and it’s quite normal that of those questions, about half of them are either not relevant or don’t add any value to their current circumstances.
Today, we’re going to look at what type of legal structure do you need?
There are a few different types of structures that you could use for your new business, however the main two of these are either a Pty Ltd company or to be a Sole Trader. Being a sole trader is easiest, and if it’s a small business without much start up capital, it’s often an easy way to kick things off. Being a sole trader means that you’re running the business in your own name. It means you don’t need to submit two tax returns and you don’t have to register a company. What is an issue here is that if the business takes off, you’ll grow out of being a sole trader. This can at times carry some expenses to change. Further, you don’t have the benefit of limited liability – ie, you’re personally liable for everything. Some foresight is needed here to work out where your business is going so you can make a choice about which structure is going to work for you.
A company structure will be more expensive – you’ll have the additional setup costs and an extra set of tax returns to do each year. However, you’ll have the (limited) protection of a company behind you and a potentially more flexible ability to run your business. For example, as a company it’s easier to take on business partners or raise capital. Further to this, you’ll have the ability to park funds in a lower tax environment. While it may sound like I’m championing running your business as a company, keep in mind that a company is an expensive and complicated way to run a business, especially if there is no need for one.
If you decide to start off as a sole trader, here are a few tips:
- Register a business name (it looks more professional and it allows you to set up your brand – you can move your business name to a company later if you need to)
- Once you’ve got a business name, go to the bank and setup a business bank account in your business name
- Off the back of your business name, you can register a web domain, email address, social media etc and start building your brand
Don’t worry about how big, new or established you look. In this current day and age, the speed at which businesses can attain great scale is staggering. Businesses only a few years old are being sold for millions and sometimes billions of dollars.
The most important thing is that you have a GOOD business. A great idea, a good structure (your mental structure is probably more important than your legal structure in the early days), great customer service and an environment that nurtures and looks after your staff is what you want to focus on. There are plenty of business geeks out there just like me that can tell you what to do and how to do it.
Get to work.