You're going to devote a lot of time and energy to starting a business and building it into a successful enterprise, so it's really important that you truly deeply enjoy what you do, whether it be running fishing charters, creating pottery or providing financial advice. When people see a passion in you for what you do they will believe in and trust in you.
How long can most people live without money? The answer is a plain not long. And it may be a some time before your new business actually makes any profits. Being employed while you're starting a business means money in your pocket while you're going through the starting a business process. We live in unsure times and many Australians are not sure what the future holds. The main deterrent to starting a small business for most people is money. Even if they have a nest egg set aside and can afford the start-up costs, they know that their new business isn't going to bring in any appreciable amount of money for a while and don't know how they're going to pay their bills in the meantime. Starting your new business part-time solves this problem neatly. You're still able to pay your bills and can afford to bankroll your new business because you've got money coming in.
One of the first big challenges in starting a business whether you are a large or one-person business, online or with premises -- is not the writing of the business plan nor looking for funding or setting up the office or opening the bank account. It is the process of searching and choosing of the right business name.Looking for the most appropriate business name can be very challenging because the word or group of words that you choose as your name can make or break your product or services. The name embodies your brand: it is who and what you are in the eyes of your customers, suppliers, financiers and competitors.
Selecting the right name is crucial for a number of reasons:
It is your customer's first contact with your company and its products.
It is what consumers use to talk about your product to other, potential customers.
The right brand name makes consumers and other businesses want to use your product or associate with your company.
The right brand name is what consumers remember when they want to use your product again.
The right brand name begins the sale for you. It is your first sales rep, one that works for you around the clock, 7 days a week. Business names are not spur of the moment creations. It is the result of possibly long days and nights of brainstorming, digging the Thesaurus for synonyms and antonyms, interrelated words and words that has some kind of relationship with the proposed business activity. The big companies even hire expensive consultants to help them choose the right name for their business or product.
The easiest business name to form requiring minimal effort is through the use of personal initials or full names. Others combine the names of the owners. This approach gives the impression that customers can expect the personal attention and care of the owner. Just make sure that your name is easy to remember and will ring a bell on peoples ears.
Using your personal name as your business name works well if you already have a proven track record in your field and leveraging your name could attract customers. Take for example finance and Wall Street companies: many carry the names of their founders who have had a long solid background in investing to represent credibility and wealth of knowledge. In the instance of Macquarie Investment Banking it took its name from Lachlan Macquarie, an early Governor of New South Wales who dramatically transformed the early settlement in Australia from a penal colony into a dynamic economy. A good example of leveraging the success the original Governor had. Blundstone boots another synonymous with quality and around for a long time. The R.M.Williams company was founded and established in 1932 by Australian legend, Reginald Murray ("RM") Williams AO, CMG. R.M.Williams was established upon the principles of quality, authenticity and durability, beliefs which still resonate in everything they do today. Holden for example was originally founded in 1856 as a saddlery maker before joining forces with General Motors in 1908.
Some names such as Everlasting Flower Shop and Long Life Mortuary Services connoting longevity are quite common in the Orient and the Far East. The names New Life, New Light, New Hope show some kind of a revival spirit. Home Sweet Home Rehabilitation Centre is a good name for those who are confined. EverSure, Everlast shows confidence and endurance. Fresh Smell Cleaners gives a built-in assurance of cleanness for a laundry shop.
To be listed ahead of everyone in a directory, some companies choose words that start with a number or start with the letter A. Since the name is the showcase of your business, there are a number of key pointers that you need to consider when creating your business name:
It should be appealing and easy to use. The name should be easy to understand, spell, and pronounce. It should be something that people can easily repeat, and most of all, remember. It should be distinguishable from your competitors. Most important of all, it should have the potential of becoming a by-word in the line of business you are in.
Get ahead of the pack. If most of your potential customers will use the telephone directory to search for companies in your business, consider your position in the telephone directory listing when you think of a name. Adding words like The or A before your name can change your position in the directory. Be cautious in using acronyms or abbreviations, as these can confuse your potential customers.
Make room for expansion. Even if you are operating a highly niched product, select names that would represent a broader category of your product line. Names that state a particular product can limit you if you want to expand your line. The name Antique Horses may hinder you when you want to sell antique furniture, that do not depict horses in their designs. Emphasize your business image. Adjectives describing your product or service can be effectively used in a business name. The cleaning company Merry Maids has successfully projected the image of cleaning workers that are too happy to do their jobs. They want to leave the impression that their happy workers will go to great lengths to make their customers happy.
Use a Distinct Name. Forget about the lure of using a name similar or identical to that of another business. If you call your line of equestrian sporting apparel Polo Sporting Designs, the holder of the trademark Polo the giant Ralph Lauren may slap you with a lawsuit and you will have to start the business registration and logo process all over again-which is a huge sap of your time and effort..
At any rate, the choice of a business name must be given a very serious thought because this will be the flag of the business. Once you have chosen the word or group of words, it will be with you for as long as you are in business and sometimes, even if others may have taken over and you have gone to pursue other lines of endeavour. So finally when selecting a business name check to see if the domain name is actually available for $39.50 + GST for 2 years HERE You should register the domain as a .com.au if possible so that people will automatically know that you are an Australian based company. In addition to prevent possible rivals trading on your name register the same domain name with a .net.au postfix as well. You should if you want to come across as professionally as possible when you register a domain and purchase some form of web hosting (it is possible to just have mail hosting if you do not want a website) This way you can have a separate business email address i.e. Paul@yourcompanyname.com.au and it shows you mean business.
You need a support system while you're starting a business (and afterwards). A family member or friend that you can bounce ideas off and who will listen sympathetically to the latest business start-up crisis is invaluable. Even better, find a mentor or, if you qualify, apply for a business start-up loan. When you're starting a business experienced guidance is the best support system of all. If you are in business and your partner is helping you-you must both work to your strengths. What this means is delegate jobs to each other that you feel comfortable doing. If your partner has more the eye for financial details then get them to do the books or work with your bookkeeper. If that is their job then a natural extension of that is for them to collect the money and debt chase customers. If you are the pitch /sales person of the business make sure you follow up and send the quotes to the potential customers yourself and that you follow up with phone calls to see if the quote was received and if you need to do anything to acquire the business or contract from a prospect customer.
Don't wait until you've officially started your business to line these up, because your business can't survive without them. Do the networking. Make the contacts. Sell or even give away your products or services. You can't start marketing too soon. In a recent marketing workshop I attended, I discovered that most business owners rely on just two or three marketing strategies to attract new business. However, there is a multitude of ways to drive new business to your door. Here are a few:
Networking is perhaps the most commonly used approach by small business owners. However, it is often poorly executed. Many people attend a networking function and take the wrong approach by trying to meet as many people as they can. They bounce from person to person, handing out business cards like it is an Olympic event and they are vying for the gold medal. They fail to realize that the most effective way to network is to cultivate relationships and give referrals to other members first.
Referrals. This marketing strategy places a close second in preferred methods of generating new business leads. The key here is to ensure that you take a proactive approach rather than a passive one. Instead of assuming that a satisfied client will refer someone to you, ask for that referral. Tell people who your ideal client is and ask for their help in finding these types of clients. The real estate agent who represented the seller when we bought our house sends us a card every year and reminds us that she loves referrals. It is not pushy, does not sound like she’s begging, and I’m confident it helps generate new leads.
Writing. This often under-utilized marketing strategy is an excellent way to become recognized as an industry expert. Every industry has trade magazines and most are hungry for good content. The Internet is also filled with websites and e-zines looking for material to send to their subscribers and customers. I now write at least one article every month and send it to more than two hundred publications. This marketing strategy alone has helped drive more traffic to our website more than anything else. It is sometimes challenging to come up with ideas and to write an 800 word article but the investment of time and effort is definitely worth it.
Newsletters. This is another powerful marketing strategy to keep your name in front of your customers and prospects. Provide key insight into business challenges and offer solutions to them. In other words, help your prospects and customers solve problems. Some newsletters are nothing more than advertising so be sure to provide valuable information to your customer. Although it is less expensive to send a newsletter electronically, you can issue it in paper format. A local real estate agent regularly sends out a one-page update of the housing market in our neighbourhood.
Cold calling.(un Australian maybe but we want you to succeed) Without a doubt, this is usually the most challenging way to market a business - I know very few people who actually enjoy cold calling. However, it can be a good way to uncover qualified prospects in a relatively short period of time. Be sure to start your conversation with a good opening to capture the other person's attention. While in the perfect world, your phone would be ringing off the hook all day with clients offering you business, the reality is that if you want business, you need to go after it, and cold calling is an effective sales tactic if it's done properly.
But many small business people would rather spend an entire day in a dentist's chair than go cold calling. Does the thought of cold calling makes your stomach drop to your toes? These cold calling tips won't eliminate your fear, but they will help you make cold calling a more successful experience.
i) Focus on the goal when cold calling.
Beginners tend to think that cold calling is about making the sale. It's not. It's about getting the chance to make the sale. Specifically, the purpose of a cold call is to set an appointment to make the pitch.
ii) Research your markets and prospects.
You need to target your cold calling to the right audience. Use market research to focus on your target market. Then find out as much as you possibly can about the company or individual you're going to cold call in advance. This gives you the huge advantage of being able to talk about their business and their needs when you call them.
iii) Prepare an opening statement for your cold call.
This lets you organize your thoughts before cold calling, and helps you avoid common mistakes in the cold call opening that would give the person you're calling the chance to terminate the conversation. For instance, you should never ask, "Is this a good time to talk?" or "How are you today?" Don't read your opening statement into the phone, but use it as a framework to get the cold calling conversation off to a good start.
iv) What should be in the opening statement of your cold call?
"Include a greeting and an introduction, a reference point (something about the prospect), the benefits of your product or service, and a transition to a question or dialogue. For example, 'Good afternoon, Ms. Marshall. This is Ken Brown with Green Works. I read in the local paper that you recently broke ground for a new office complex. We specialize in commercial landscape services that allow you to reduce in-house maintenance costs and comply with the State's new environmental regulations. I'd like to ask a few questions to determine whether one of our programs might meet your needs.'"
v) Prepare a cold calling script for the rest of your cold call.
Lay out the benefits of your product or service and the reasons your prospect should buy. Write out possible objections and your answer to them. Without a cold calling script, it's too easy to leave something out or meander. Once again, it's not that you'll be reading your script word for word when you call, but that you've prepared the framework of the cold call in advance.
vi) Ask for an appointment at a specific time when cold calling.
Say, "Would Wednesday at 11 a.m. be a good time to meet?" instead of saying, "Can I meet with you to discuss this next week?"
vii) Remember that gatekeepers are your allies not your foes.
Be pleasant to whoever picks up the phone or is guarding the inner sanctum when cold calling. Develop strategies to get the gatekeeper on your side. Sometimes asking, "I wonder if you could help me?" will help you get the information you need, such as the name of the right person to talk to or when the best time to contact the prospect is. Learning the names of gatekeepers and being friendly when cold calling helps, too.
viii) Do your cold calling early in the morning, if possible.
That's the best time to reach the decision maker directly, and for most people, the time that they're most energized.
ix) Be persistent when cold calling.
"Eighty percent of new sales are made after the fifth contact, yet the majority of sales people give up after the second call" And above all, practice, practice, practice. While cold calling may never be much fun for you, you can get better at it, and the more you practice cold calling, the more effective a sales tactic it will be. So get your script and your call list together and reach for the phone. The people who want to do business with you are out there - but you have to let them know about you first.
x) This is an awful Americanism but if you do this it will come across in your enthusiasm for what you do and that is always “SMILE & DIAL”
Offer a guarantee. A concern many people have when changing suppliers is the risk associated with the change. They may not be completely satisfied with their existing supplier but the risk of choosing a supplier who may be worse can prevent them from changing. Eliminate this concern and offer a guarantee.
Advertising There are many other ways to market your business and generate new business leads. We can offer a paid Telephone Consultation for all Logo packages purchased that will offer some sound advice for strategies to get customers fast. This will be given by the person who markets this business and has over 25 years successful marketing and advertising experience-in the fields of Local and National Newspapers, Radio, Websites and TV.
Well of course we would say that but the information below is a good guide to sound design principles we think.
So what makes a logo good? A good and effective logo should follow solid basic design principles, be functional, represent the company, and be unique. Sound easy enough, right? I don't think so. The process of designing a logo can very well define its outcome, however, unless you can defend the principles it could be very arbitrary. In this article I will try to break down the functionality of a logo so that it is not so variable. If you critique your logo design with these principles there should be little space to fail with your logo designs.
A good logo should be:
2 Simple (describable)
3 Memorable (unique)
4 Functional (scalable and effective without colour)
A good effective logo should represent the business it identities. Logo symbols do not have to directly relate to the products. The Apple logo below would convince customers that they are buying fruit which is not true since Apple sells computers, IPADS, IPODS and phones!
"The atmosphere a logo generates can often be enough."
The Toys R Us logo would not be appropriate for a company that specializes in banking. The colours and typography aims for children who want to have fun. You can compare it to The Children's Place logo which is targeted to sell quality children's clothing. The goal of the logo is to sell clothes to the children's parents.
"It's an apple with a bite taken out…yet it is in fact unique."
The principle of a logo's simplicity is the ability to describe it in words. The apple logo is a superb logo example because of its simplicity.
"A logo's simplicity and memorability go hand in hand."
If you can describe a logo then you can remember it. This is why simplicity is imperative. Many people think that a logo should directly relate to the business it represents. The fact is that relating the logo to the business could make it more memorable but it really is not necessary for success. The key behind a logo is the experience. Many companies don't realize that a logo is only as good as your product. It's our job to design a logo that a customer will remember when they walk out of the door.
"Quality service will decide whether the logo will be used to relate the company to a positive or negative experience. If the logo is simple and unique then it will be easy to remember that experience."
"No amount of colour will save a logo that is poorly designed."
If a logo is not functional then it will severely handicap a brand. I always leave colour until the very end of the design process. A logo that does not work well in black and white will not be useful in colour. Keep in mind embroidering.
Making sure a logo is scalable is very important and cannot be stressed enough. A good logo should look good down to an inch or even smaller. A good logo should be able to function in any way that it is printed. Many companies will order pens, pads, apparel, and whatever else to get their logo into customers hands…not to mention the standard stationary design including business cards, letterheads, and envelopes.
Will your logo stand up for 5, 10, 15, or even 20 years?
A timeless logo design may be the hardest of the hard to achieve out of all of the guidelines. Companies will often make adjustments or even revamp a logo design over time. After reading an article by fellow design blogger Jacob Cass he brought to my attention just how timeless the Coca-Cola logo really is. There main competitor Pepsi has constantly revitalized their logo to fit the current time period while the Coca-Cola logo has went almost untouched.
The main reason for doing a business plan first when you're thinking of starting a business is that it can help you avoid sinking your time and money into starting a business that will not succeed.
See Why You Need A Business Plan below:-
The business plan is the blueprint for your business. You wouldn't walk over to an empty lot and just start nailing boards together if you wanted to build a house. Starting a business without a business plan is just as foolish. Yet unlike a house, a business isn't static. We often make the mistake of thinking of a business plan as a single, static document that you just put together when you're first starting out and then set aside. In actuality, the business plan for any business will change over time as the business develops, and any particular business may have multiple business plans as its objectives change.
Here are five+ good reasons why you should write a business plan:
i) To test the feasibility of your business idea.
Writing a business plan is the best way to test whether or not an idea for starting a business is feasible, other than going out and doing it. In this sense, the business plan is your safety net; writing a business plan can save you a great deal of time and money if working through the business plan reveals that your business idea is untenable. Often, an idea for starting a business is discarded at the marketing analysis or competitive analysis stage, freeing you to move on to a new (and better) idea.
ii) To give your new business the best possible chance of success.
Writing a business plan will ensure that you pay attention to both the broad operational and financial objectives of your new business and the details, such as budgeting and market planning. Taking the time to work through the process of writing a business plan will make for a smoother startup period and fewer unforeseen problems as your business becomes established.
iii) To secure funding, such as bank loans.
You're going to need both operating and start-up capital to start a new business and you have no hope of getting any money from established financial institutions such as banks without a well-developed business plan. And established businesses often need money, too, to do things such as buy new equipment or property, or because of market downturns. Having a business plan gives you a much better chance of getting the money you need to keep operating or to expand.
iv) To make business planning manageable and effective.
A business plan is essential if you're thinking of starting a business, but it's also an important tool for established businesses. Viable businesses are dynamic; they change and grow. The company's original business plan needs to be revised as new goals are set. Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company's growth should take.
vi) To attract investors.
Whether you want to shop your business to venture capitalists, or attract angel investors, you need to have a solid business plan. A presentation may pique their interest, but they'll need a well-written document they can take away and study before they'll be prepared to make any investment commitment.
Be prepared for your business plan to be scrutinized; both venture capitalists and angel investors will want to conduct extensive background checks and competitive analysis to be certain that what's written in your business plan is indeed the case. Writing a business plan is time-consuming, but it's essential if you want to have a successful business that's going to survive the start-up phase. If your business doesn't have one, maybe it's time to start working on one. The process of writing a business plan can do wonders to clarify where you've been and where you're going.
On the other hand, just because you're starting a business, doesn't mean you have to be an expert on everything. If you're not an accountant or bookkeeper, hire one (or both) If you need to write up a contract, and you're not a lawyer, hire one. You will waste more time and possibly money in the long run trying to do things yourself that you are not qualified to do. The services of a good accountant can be invaluable to your small business. He or she will help you navigate the maze of tax laws and provide the financial advice you need to manage and grow your business. While we tend to associate accountants with taxes, keeping you abreast of tax changes and doing your taxes are not the only services a good accountant provides.
Whether you're wondering whether or not to incorporate your business or trying to decide if you should buy or lease a company vehicle, a good accountant will be able to tell you how such a move would affect your taxes and/or your business's growth. If you don't have an accountant working for your business, you need one! But how do you go about finding a good accountant?
i) Ask other business people about their accountants.
Find out who they use and how satisfied they are with the services their accountant provides. If you don't or can't get any worthy referrals using this method, use the phone book and choose several accounting firms. When you call, tell the receptionist what you do and ask for the name(s) of accountants familiar with your type of business. Use this information to create a shortlist of prospective accountants.
ii) Call the four or five accountants you've selected and ask to discuss their services.
Ask him or her about his education (such as whether he's a CPA registered Certified Practising Accountants), about his experience with your industry, and about his fees. Use this first contact information to choose two or three accountants to interview.
iii) Prepare a short list of questions you want to ask prospective accountants.
It's important that you choose an accountant that is familiar with the special requirements of your business and/or your tax situation, so you can use these to vet potential accountants. For example:
If your business is Internet related, you'll want to find out if the accountant is familiar with the language of e-commerce.
If your business involves periods of work abroad., you need an accountant that's knowledgeable about Australian double taxation agreements as your earnings are taxable in Australia from worldwide income-Even Paul Hogan didn't do this so it is best to check!
If you're thinking about exporting, ask how the accountant might help you develop an export strategy.
I always ask a question about their phone call and/or email policy. It's important that your accountant is easy to contact when you have a question. How accessible is he or she and how do they bill phone call or email advice?
iv) Meet with the prospective accountant(s) you've chosen, and ask your questions.
There's nothing like a face-to-face meeting for gauging how well you might work with another person. Besides assessing the accountant's knowledge, see how comfortable you are with him or her and how well the two of you communicate with each other. When you choose an accountant for your business, you're going to be establishing a long term relationship, so feeling comfortable with him or her is important.
After all, an accountant isn't just a tax preparer; he or she can help you build a blueprint for the future of your business.
Everything about you and the way you do business needs to let people know that you are a professional running a serious business. That means getting all the accoutrements such as professional business cards, a business phone and a business email address, and treating people in a professional, courteous manner.
Tips on Business Cards
Business cards are traditionally the primary way that business people present their contact information to other business people and potential customers or clients. Standard business cards are 2 by 3 inch rectangles of card stock with the business person or professional's business information, such as his or her name, the business name and address, the service or products supplied and the phone number(s), fax number(s), and website and email address(es) printed on them. Note at Aussie logos that the cards we print in the Gold package cards are the best quality Card stock available in Australia (420 GSM). We want your business to shine so we heavily subsidise these cards as we believe that it is a primary reason for so many companies that have worked with Aussie Logos of our continued success. We print full colour both sides and use a Matt Celloglaze silky finish. We have come across many Print companies charging over $300 to print our quality cards (the exact same quality that you get for $100 when you buy a gold package) So this is our way of helping you.
The back of business cards is usually (but not always) blank. For instance, if you're travelling abroad for business it is good practice to have one side of your business cards translated into the language appropriate to the country you are visiting. (When you present such business cards, you should present the card to the recipient so that the recipient's language is face up)
Business cards are usually presented to one person by another in a face-to-face exchange, although they may also be attached to invoices and thank you cards, or even attached to a vehicle in a business card holder so passers-by can help themselves to one if they're interested in the service or product advertised on the vehicle. When business cards are exchanged in person, they may be exchanged at the beginning or end of a conversation. When you receive business cards, you should always look at the card and comment upon it before putting it away - preferably into a business card holder. It's bad manners to stuff business cards into your pockets.
Business cards originated as Tradecards in 17th century England. They were used both as advertising and as maps as there was no formal street numbering system in London at the time. Today business cards are still used as advertising as well as a convenient way to present a business' contact information. Business cards can even double as brochures-we encourage you to list all your services on the back of your cards.
It's much more difficult and expensive to unsnarl a mess afterwards. Your business will need to be registered? Will you need to be registered for GST? What insurance do you require for your business some examples to investigate.
Business Interruption Income protection Public Liability Malpractice Professional Indemnity
and so on, but it all depends how you run your business. If you are looking for insurance to cover your business goods etc. that you use from home, phone and speak to your home and contents provider, most will cover a work from home business for a small extra premium. If you will be immediately employing staff you need to be abreast of current Superannuation employer Contributions and PAYG withholding tax must be kept up-to-date and available for ATO to collect? The differing Types of companies in Australia can be quite complicated and can affect your income tax situation? Learn what your legal and tax responsibilities are before you start your business and operate accordingly.
For anyone who's considering setting up their own business, there's a heap of decisions yet to be made. One of the earliest decisions to be made, although it can be changed later with some effort, is the type of business to operate.
You have to decide on a legal structure when you start your business. The main choices are:
Sole trader (also called a "single proprietor") Partnership Trust Company
What's a sole trader?
This is the most straightforward structure for a business. Basically it means the business decisions are being made by one person. Of course, it doesn't necessarily mean that the business has only one worker. The sole trader can employ others to do any or all of the work in the business.
What are the advantages?
This type of structure is ideal if the business is not complicated, especially if it does not require a great deal of outside capital.
There isn't much paperwork in establishing this type of structure.
If you use your own name, you don't have to register the business name. This will only be necessary if you have a trading name.
There are less stringent reporting obligations compared with other structures.
You may be able to deduct tax losses from personal income.
You are entitled to profits and the ownership of assets.
It's relatively straightforward to wind up
What are the disadvantages?
You are personally liable for all debts
Personal property may be vulnerable for debts and other business liabilities.
Large sums of capital are less likely to be available to a sole trader, and you may have to rely more on overdrafts and personal savings.
You may require enormous investments of time without the normal employee recreation leave and other benefits.
There may be issues of continuity of business in the event of death or illness.
Talk to an accountant or lawyer about the legal ownership of personal assets or the use of trusts to limit liability. For instance, the family home may not be exposed if it is in the name of your spouse — you must get legal advice before you do this, because there are other consequences, especially if the spouse dies or you divorce. Also, you may not be able to do this if your sole purpose is to avoid a creditor.
A sole trader pays tax in their own right, as part of their personal income tax return at the personal rate of income tax.
What is a limited partnership?
A partnership is made up of two or more people who jointly carry on business with a view to profit. Partnerships can be either general or limited. A general partnership is one where all partners are equally responsible for the management of the business, and each has unlimited liability for the debts and obligations it may incur. A limited partnership is one where the liability of one or more partners for the debts and obligations of the business is limited. A limited partnership consists of one or more general partners (whose liability is unlimited) and one or more limited partners)
In a limited partnership:
the general partners manage the business and have the power to enter binding agreements on behalf of the partnership; their liability for the debts and obligations of the limited partnership is unlimited
the limited partners are passive investors; they must not manage the business and their liability for its debts and obligations is limited in proportion to the amount they have agreed to contribute to the partnership. A limited partnership is formed when the partnership is registered. Registration also confirms each limited partner's investment and liability.
For example Victorian limited partnerships must be registered with Consumer Affairs Victoria under the Partnership Act 1958.
Incorporated limited partnerships
An incorporated limited partnership is a special type of limited partnership, primarily used by businesses engaged in high-risk venture capital projects. You should seek expert legal advice if considering forming an incorporated limited partnership.
Incorporated limited partnerships must be registered with your STATE Consumer Affairs
For more information, view our Incorporated associations section.
What is a trust?
Trusts are often used in connection with running a small business. A trust is not a separate legal entity in the same way that a company is. In simple terms it is a business structure where a trustee (usually a company) carries out the business on behalf of the members of the trust. A trust is set up through a trust deed.
Types of trust
There is a range of trusts:
discretionary trusts - where the trustee has a discretion when distributing funds to the beneficiaries. The most common example is the family trust;
unit trust - were unit holders have a number of units in the trust. Distribution from the trust is on the basis of the number of units held.
hybrid trust - this is a combination between a unit trust and a discretionary trust.
Appointer - is the person who has power under the trust deed to remove the trustee & appoint another trustee.
Beneficiaries - these are the people (can include a company) who are entitled to distributions from the trust.
Settlor - this is a person (who is unrelated to the beneficiary or trustee) who provides an amount of money (e.g. $10) to establish the trust.
Trustee - this is usually a company (it can be a person) which owns the assets of the trust, not in its own right, but as trustee of the trust. The trustee is responsible for the financial "health" of the trust and makes decisions about distributing income, borrowing money etc.
The pros and cons
Advantages of a trust include:
there may be taxation advantages - although this depends on current tax laws;
allows for income streaming;
limited liability etc.
The disadvantages of a trust include:
possible implication for capital gains tax;
distribution of tax losses;
establishment and administration costs etc.
What is a company?
n many ways a company is similar to a sole trader or partnership, except that it exists as a separate legal entity from the owners (who are called shareholders). This means that in most circumstances, personal assets of the owners cannot be touched to pay for the debts of the company.
What law applies? A Commonwealth law called the Corporations Act.
There is a "Small Business Guide" included as part of this Act to help small business operators understand their rights and obligations.
Regulation of companies
Companies are regulated by the Australian Securities and Investment Commission (ASIC). The ASIC is an independent government body that administers the Corporations Act. Its aims are to provide protection for consumers and businesses in their dealings with companies and to ensure that companies:
operate according to the law;
report their activities;
maintain proper records; and
maintain an information database on company details.
Types of companies
Most companies fall into two categories, depending on the type of liability that can be imposed on the owners:
A company limited by shares, limits the liability of shareholders to the value of their shares. This structure is suitable for most trading businesses and can be a private company or a public company
A company limited by guarantee, most often used by non-trading organisations, for example, sporting clubs.
The pros and cons
Advantages of a company include :
it is a separate legal entity from the owners;
you can own property in the name of the company;
there is usually limited liability for the shareholders (unless they have given a personal guarantee);
you may be able to take advantage of tax minimisation schemes (legal ones, of course!);
it can be owned and operated by only one shareholder and director;
it may make it easier to attract capit
al investment because of shareholders' limited liability.
Possible disadvantages include:
they can be complicated and expensive to establish and administer if it is a "large company";
if you are not a sole shareholder, the shares may be difficult to sell;
if you have only a minority shareholding you may be allowed little or no input into the affairs of the company;
you will only be able to leave the shares in the company to your beneficiaries under your will, not the assets of the company separately; and
they require expensive procedures to comply with reporting regulations.
Is liability always limited?
No, there are types of structures that do not provide limited liability for owners, but they are unusual and we will not look at them here.
However, even in companies limited by shares it is possible for owners to be exposed to personal liability. For example:
a bank may require a personal guarantee against loans or overdrafts; or
sometimes a director can be held personally responsible for actions that are clearly beyond the ability of the company to pay.
Shares can either be available to the general public or the private owners. If the shares are available to the public it is called a "public" company. If the shares are available to private owners it is called a private (proprietary) company. We will deal solely with private companies.
The Corporations Act makes the procedures for small companies a lot easier than they used to be.
A company will also have:
the words "Proprietary Limited" (Pty. Ltd.) after its name;
a unique Australian Company Number (ACN) that will be included in most company literature and business documents, e.g. invoices, receipts, business letterhead, cheques etc.;
a common seal (i.e. a stamp) which contains the company name and other identifying details, e.g. the ACN (it is no longer compulsory to have a common seal);
the words "Proprietary Limited" (Pty. Ltd.) after its name;
a unique Australian Company Number (ACN) that will be included in most company literature and business documents, e.g. invoices, receipts, business letterhead, cheques etc.;
a common seal (i.e. a stamp) which contains the company name and other identifying details, e.g. the ACN (it is no longer compulsory to have a common seal);
a registered office, although this doesn't have to be the place of business, in fact it is often the address of an accountant or lawyer. However, under the law, companies are required to notify the ASIC of changes in the company's place of business where that place is different from the registered office.
Shelf companies are "sold" by services that simultaneously register a number of companies and then sell them "off the shelf". They suit people who have straightforward requirements for their company structure.
Starting a private company
choose a name for the company and ensure the name is acceptable for registration, e.g. it is not identical to another name or otherwise unacceptable (e.g. it cannot be the same as a pre-existing name). This can be checked with the ASIC. Remember, this refers only to the corporate name - if the company operates in the public under a different business name, that name must be registered with the Office of Fair Trading;
reserve the company name. It will be reserved for two months. Otherwise you can apply to use the name at the time you register, but remember it may already have been taken;
decide on the names of members, directors and the secretary of the company - these people must agree to taking on these roles. A company must have at least one company secretary who may also be a director and member - the secretary has responsibility for record-keeping including registers required by Corporations Law and minutes of meetings. Changes to appointments and changes of addresses of directors must be supplied to the ASIC within 14 days of the change;
decide where the registered office will be;
lodge the application with any ASIC Business Centre or with the Local ASIC Representative
notify the ASIC of certain changes to the business practices of the company e.g. changes to the registered office, operating hours, company name, substantial transfers of shareholdings;
lodge annual returns with the ASIC if this is needed (this is not always the case for a small private companies);
keep company books and records.
Remember, unless a court agrees, you cannot be a company director if:
you are declared bankrupt and have not been discharged; or
you have been convicted of certain offences connected with the management of a company, a serious fraud, or certain other offences to do with the breach of duties of directors and insolvent trading. Usually you are barred for five years after the conviction.
Forms You can get the ASIC forms from ASA Business & Management Services.
Constitutions Companies no longer require a memorandum and articles of association. Instead they may:
have a set of rules called a "constitution", which sets out the objects of the company. It does not have to be lodged with the application for registration but must to be kept with the company's records; or
depend on the rules of internal management - these are called "replaceable rules" because they can be replaced in whole or part by a constitution. The replaceable rules do not apply to private companies with a single member who is also the sole director.
Annual returns All companies must lodge an annual return with the ASIC not later than January 31 for the previous Financial year ending June 30th.
Following the advice on starting a business above will make starting a business both a smoother, less stressful process and go a long way towards ensuring the business you start lasts and thrives.