The start-up phase is one of the most critical periods for a business. If you fail to take the time to properly organise the different business components, such as tax registrations and accounting functions, you limit your chances of success. And if some steps in the process are missed, business owners can leave themselves open to attack.
Q. I am just starting a cleaning business and not sure how to go about registering it. Do I just register for an ABN, and what do I need to put on invoices and receipts? Do I need to get a business bank account, with a credit card/debit card linked to purchase equipment, vehicle, products, uniforms etc?
A. The first thing to consider when starting a business is whether you will operate under your own name or under a business name. If you plan is to develop a business that will be sold at some time in the future it is more important to operate under a business name. This not only makes your business more recognisable but also makes it easier to sell.
The cheapest way to establish a brand or an identity is by registering a business name. If you want to protect your personal assets in the event of something going wrong, as well as registering a name, you need to set up a company. This will provide a reasonable level of protection for the business name but the best protection comes from registering a trademark with your business name in it.
You should also take out public liability insurance, which in most cases is not that expensive - plus consider other insurances such as income protection.
Once you have established how you will operate the business you then need to register for an ABN if you will be offering your cleaning services to other businesses. If you do not register for an ABN the businesses you deal with will be required to do deduct 46.5 per cent withholding tax from whatever you invoice them. The ABN will need to be shown on all of your paperwork, including invoices and letterheads.
You will also need to register the business for a tax file number if you are not operating as a sole trader. If you expect the business income to be more than $75,000 a year the business will also need to register for GST.
To reduce administration and accounting costs you should set up a bank account purely for the business. All income should be paid into, and expenses paid out of, that account. In the set-up phase, rather than paying for business costs from your personal account, you should deposit funds into the business account and pay them from that.
It also makes sense to have a credit card that is used solely for business purposes. Each month when the credit card is paid you break up all of the expenses into the different types and account for them with one cheque.
Questions on small business tax or other issues can be emailed to firstname.lastname@example.org.
Tax for small business, a survival guide, by Max Newnham is available in bookstores.