Congratulations on harnessing your entrepreneurial mojo and making the most exciting decision to start your own business.
Having taken the plunge ourselves, we know what it’s like and we’re here to share some tips to help you along your way – some of which are not so ‘lawyery’!
Seek advice early
First up, speak to your accountant or financial advisor to obtain tailored and strategic advice about your business structure that will suit your business model, your mid to long-term plans for the business, its risk profile and your budget.
Structure it Right
Let’s get the legal stuff out of the way first!
There are many ways to get into business from structure point of view. Before you hit the ground running, seek strategic advice and understand your options. In a nutshell, here are a few different alternatives:
Sole Trader: where you trade under your individual name with an ABN. This is a quick and inexpensive option to use to initially dip your toe in the water of running a business, however this structure affords no asset protection to the business owner if things don’t go to plan down the track. The revenue generated by a business under this structure is generally taxed at the tax rate applicable to the individual running the business.
Company: a company is a separate legal ‘person’ to its director and is a structure registered with ASIC. Companies afford sound asset protection to their directors for most risks, but not all. Generally, the liability of the shareholders of a company are limited to the value of their shares and it’s a good option when you want to jump into a business with third parties.
Before incorporating a company, be sure you seek advice about your legal duties as a director and about the various ways in which you can own the company (how you hold shares), especially if you’re not going into business alone.
Partnership: a partnership can be an arrangement between individuals or companies. Generally, partners split the profits and the liabilities equally. This is not, however, always the case and how liability is apportioned needs to be carefully considered up front. This may be influenced by the proportionate contributions of capital each partner tips in at the outset or other legal and tax matters. A partnership registers and trades under its own ABN.
Trust: a trust is a concept whereby a trustee, which can be an individual or a company, holds assets on behalf of and for the benefit of beneficiaries. Trusts can be very useful for asset protection and for streamlining the benefit of tax efficiencies, in terms of the distribution of business profits, to beneficiaries. There are different types of trusts used for different purposes and the one to choose will depend on the nature of your business, who you’re getting into business with and what your long-term plans are.
Seek advice early about the right structure for your business. You can’t always swap between them easily, and even where you can, there may be tax consequences for doing so down the track that you could otherwise could have avoided with the right advice up front.
Choosing a name and brand identity for your business is one of the most exciting and creative stages of starting up.
First, check the business name you want to use is not taken. This means checking the ASIC Business and Company Name register to see if its available. If it is, make sure you then also check the IP Australia Registerto ensure it is not already a registered trademark.
Remember, just because a name is available on the ASIC register doesn’t mean you will be able to exclusively use it in your business. If you use a registered business name that someone else has already registered as a trademark, they will be able to take action to try to compel you to re-brand your business later if they seek to enforce their trademark.
Some strategic research and preparation will go a long way before you launch your new brand into the market place.
Know your numbers!
Know your set-up costs. Don’t only focus on the generation of income. Your cashflow is hugely important, so make sure you can know your expenses and set yourself up to get paid in time in order to be able to keep paying your expenses on time. These can vary significantly depending on the kind of business you are starting and can include:
- Rent and outgoings
- Marketing – website, branding, social media
Put aside a cash buffer, which should ideally cover at least 3-6 months of monthly costs such as rent, salaries and drawings before you open for business. There’s nothing like a safety net to help you sleep at night!
Estimate how much revenue you need to earn to break even each month before you can start making money – don’t forget to pay yourself a market salary once you can afford to!
Protect your Brand
When you land on a doozy of a name and branding concept it’s a great idea to lock in your ability to use your brand for use in the course of your business and in relation to the goods and services you are selling. The only way to lock it in for your exclusive use is by registering your business name and/or logo as trademark.
You can of course try fight off any copycats, however unless you have evidence of a proven and established history of consistent prior use of your brand in the market, it is very difficult to assert a claim of exclusivity. The best way to ensure you your brand is protected is by registering it as a trademark.
Starting a business can be daunting, but with the right preparation, information, and support around you, that initial leap of faith will be the most exhilarating decision you’ll make.
Finding your purpose, filling the gap in your market, and getting yourself out there is an adventure like no other. It’s hard work, you’ll make mistakes along the way, the learning curve is steep and the ride exciting.
Mistakes are natural but without them we can’t grow and learn. Surround yourself with supportive colleagues and seek the guidance of a mentor. Work hard, stay humble, focus on the long game, and celebrate the small wins along the way.
The right preparation, early investment in sound, commercial and strategic advice, as well as the support of your family, clients and friends will ensure a soft landing.
You’ll never look back!
*The information provided in this blog is not to be relied upon and is general in nature only. To obtain tailored advice for your circumstances, get in touch for an obligation free chat. Coffee’s on us!