NEW BUSINESS ADVICE : BE AWARE!
Many of us want to become business owners. But there are numerous obligations placed on new businesses that need to be complied with and most are unaware and get the true picture only when they actually get into business. Hence getting a new business advice beforehand from a qualified accountant would go a long way for you and help you know what are the pitfalls of owning, managing and operating a business. I have compiled below a 10 point expression of what are the do’s for all new businesses. This list is non exhaustive and there could be numerous aspects that could drive and affect your decision making, hence either buying or setting up a new business could in fact turn out to be one onerous decision for you.
The below article on new business advice is designed to educate you in relation to the one of the many facets of opening a new business and where a qualified accountant’s new business advice may be extremely advisable.
|Choosing the right one: Before buying/setting up any business you should carry out some basic due diligence measures. Remember not all businesses for sale out there may be meant for you. You should visit the shop/location and spend some time there researching and taking as many notes as you can. This should be done repeatedly at different times of the day and different days of the week. Once you are satisfied with what you see you should get a Section 52 and at least two year’s financials and take the figures to an accountant to get a qualified opinion about the financials. The ATO provides a free fully detailed and comprehensive business viability tool, which could be used to drive your due diligence process. It is important to note that the format of the business and the industry should suit your lifestyle and objectives as well. Wrong person for the right business and right person for the wrong business could end up in disaster.
|Financing the Business:Before signing a contract of sale, you should consider the financing options for the purchase. On numerous occasions the financial institution does not finance as per the expectations of the business purchaser. Once the financing options have been considered the loan component should be considered in a cash flow projection to reassess the viability given the personal circumstances of the new business buyer. Once all figures seem to add up and you are satisfied by the physical inspections of the location, a preliminary due diligence may have been completed.
|Strategy:Every individual is different and hence we all have different approaches. A business owner thus has his own vision about how he wishes to run his endeavour. Hence a business strategy needs to be devised and this should consider 3-5 year profit and loss projections and a blue print of what the owner believes will be the return on investment over that period. This strategy is only a business strategy that concentrates on how it will be run over a period of time. This is similar to a Business Plan but the approach here is analytical, personal, critical, objective, practical and realistic.
|Structure:Depending on what your short and long term goals and objectives are you would choose a structure that will hold your business. You should decide on a structure depending on the mix of people involved, including related and non-related parties, regulatory requirements and in consonance with your strategy. This structure could be a sole trader, partnership, company or a trust. While there are the four majors, there are numerous variations within the four structures that could be used by you depending on your goals and objectives. An accountant should be able to explain to you the difference between choosing one over the other.
|Registrations:Once a structure is set up, the next step will be about getting the various registrations. This would typically be ABN (Business), TFN (Tax), PAYG (Employee’s tax withholding), GST (Goods and Services tax). You would also need to register a Business Name through ASIC. Once this is done you could proceed to open a bank account. These are required so that you are legally set up to start your shop.
|Insurances:Insurances are for your security. Choosing the proper cover for your business is in your best interests. An Insurance broker can guide you in relation to an appropriate Insurance cover. You may need various insurances depending on your requirements. Generally insurances would cover public liability, product liability, professional indemnity, theft and so on.
|Employees/Wages set up:Once you decide you wish to hire employees, you would need to get them to complete TFN declaration forms and get them to sign employment contracts. You should also need Work-Cover for the employees working for you. You need to withhold taxes in accordance with the employment contract and the signed TFN declarations for your employees. Superannuation is one another obligation placed on businesses and employers need to account for this and pay superannuation on gross wages paid.
|Accounting & Bookkeeping:Record keeping for small businesses is an important aspect of managing and operating your business. All business records need to be secured for at least 5 years. There is a specifically prepared guide titled “Record Keeping for Small businesses” that can be downloaded from the ATO website by typing NAT 3029 in the search box.
|Agreements & Legality:E very business needs an advice from a solicitor/lawyer in relation to legality of contracts. These contracts could be every piece of paper that could be signed.
Examples of legal documents include Confidentiality agreement, Employment contracts, HOA (Heads of Agreements), Shareholders/partnership agreements,
Contract of Sale documents. A lawyer or solicitor should be able to assist you in relation to such agreements.
|Business Succession Planning:While you plan for the best, you need to be aware and plan for the worst. Examples for such an analogy would be; partners going their own ways; business being sold due to internal disputes or operations being wound down due to ownership and rights issues. When you start a business, it would be advisable to form a blue print of what happens to the assets in case of a dispute or if one of the partner resigns or wishes to leave. Business succession planning should generally encompass many life changing events too but this is legal jurisdiction and a lawyer dealing in such areas of legal practice should be consulted.
While I have tried to be as precise and clear as possible, I do acknowledge that I have packed a lot within that short space provided. My idea is to create awareness about what you may expect and will be required to do if you are looking to become an entrepreneur. There are numerous successful businesses around you and me and all business owners are tasked with the same obligations. A business and the environment in which a business operates changes constantly. The business needs to adapt and evolve over time. Lifecycle of any and every successful business could be traced to its ability to adapt to the changing environment and times.
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