Author Topic: Starting your own small business  (Read 3205 times)

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Offline Halcyon

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Starting your own small business
« on: May 09, 2018, 06:51:40 am »
I figured there would be a lot of experience on this forum. I'm looking to start my own small business, however not having any experience in this, I'd love to hear from those who have done it.

The business will be based within and servicing clients in Australia only, so I'd need to do some research on the relevant tax rules etc... I have spoken to an accountant already to gain some basic advice.

It will involve a few other people, so it won't be set up as a sole-trader, rather a partnership or a company. It will have no "employees" as such, the partners/directors will be doing all the work and taking a cut of the profit.

I don't want to go into too many details but it is very much technology/electronics related (and no, I'm not going up against Dave or his many pies). I think our business plan is solid and the products/services we will be providing are very sought-after. We are targeting a very specific market so what we do and sell won't be open to just anybody. What makes it slightly more difficult is that we'll be running this company in addition to (and totally independent) of our full-time jobs. Essentially we aren't hoping to make millions, but rather boost our existing income.

We looked at running this as a "hobby" but according to Australian laws, we tick all the boxes of a "business". We would be hard-pressed trying to claim this was merely a hobby.
« Last Edit: May 09, 2018, 07:20:34 am by Halcyon »
 

Offline julianhigginson

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Re: Starting your own small business
« Reply #1 on: May 09, 2018, 07:04:54 am »
I have my own (just me) Pty Ltd business... had looked into sole trader instead but decided the extra hassle was worth it for me and my situation.
I'm happy to talk about what I understand of it all...

What do you want to know?

A Pty. Ltd. company requires a tax return at the end of the year, and yearly registration fees with ASIC.
so expect to spend around $500 to form the company, then maybe $800/year in registration and tax return fees with your accountant to run it.

The good thing about Pty Ltd is that you personally have limited liability - Even if the wheels really fall off this venture, nobody should lose their house (unless you've done something as a director you can be sued personally for...)

Since it's a thing with friends - you should still have a formal agreement as to who owns what of the business and how profits should be shared, and how you should work together and resolve disputes - just  to put everything in black and white, in case things go weird one day.

Western Sydney Business centre has some really good advisors in my experience. They even run little regular courses on starting a business..
https://wsbusiness.com.au/
On top of the courses, you get a few free consultation hours from them (gov funded) which can be useful if you have no idea what you're trying to do or why, in relation to the business structure or even developing the business. You might even get one of their consultants to talk to you prior to doing the legals side of the setup, if you want some more advice over which form is best for you?
« Last Edit: May 09, 2018, 07:07:00 am by julianhigginson »
 

Offline BradC

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Re: Starting your own small business
« Reply #2 on: May 09, 2018, 07:15:04 am »
The business will be based out of Australia

I can't figure out if you are saying the business will be based inside or outside of the country. Having done both (and currently inside) there is quite a bit of difference.
I currently have a business for my consulting work (just me) which is a pty ltd, and then have one in partnership with my brother (so 2 directors) which is another pty ltd for something entirely different.

I set the first one up mostly myself and we had an accountant set the second one up for us. Find a good accountant and have them do it for you. It's worth it.
Make sure you get your insurance in order and keep abreast of the tax legislation and any changes as they come up.

 

Offline DerekG

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Re: Starting your own small business
« Reply #3 on: May 09, 2018, 07:15:59 am »
The business will be based out of Australia

It will involve a few other people, so it won't be set up as a sole-trader, rather a partnership or a company. It will have no "employees" as such, the partners/directors will be doing all the work and taking a cut of the profit.

Generally, Australian companies cannot pay the shareholders "a cut of the profit" (ie a dividend) until they have firstly submitted their tax return & paid company tax on the profits.

You will need to decide if you wish to register for GST or not. If you turn over less than $75K pa then you don't have to (with some noticeable exception like Uber), but if you don't, you cannot claim the GST you have paid to your suppliers. If you are going to mainly sell to customers who are likely to be able to claim the GST back, then it is probably best for you to register for GST.

You will need to register for an ABN & have a TFN issued. You can apply for these on-line with the ATO.

Once you have an ABN you will be able to apply for a bank account in the business name.

Consider how people will pay you (ie direct to your bank account, via credit card or perhaps via Paypal).

Navigate to https://abr.business.gov.au/Search/Index to see if the name you wish to use has already been taken.

I hope this helps.

ADDED: You can locate an on-line provider of companies/trusts/partnerships agreements. These will generally be a LOT cheaper than asking your ordinary accountant to form it for you.

Speaking from experience, don't bring on anyone else unless you REALLY need them. Further down the track you may well end up paying them for doing very little. If you needs funds, try & borrow the funds that you need & then pay back with interest, rather than bringing on another shareholder, even if he/she is willing to lend the funds with no interest.
« Last Edit: May 09, 2018, 07:20:36 am by DerekG »
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Offline Ice-Tea

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Re: Starting your own small business
« Reply #4 on: May 09, 2018, 07:22:14 am »
Make sure you have a good and concise agreement in place with your companions. Equal shares sound great untill someone is not willing or able to do an equal part of the job (or just stinks at it). Who gets to decide stuff? What if you buy a cheap Rigol to do your measurementts and your brother in arms figures he needs an 8.5 digits Keithley to do his job? Etc. etc...
 
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Offline Halcyon

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Re: Starting your own small business
« Reply #5 on: May 09, 2018, 07:25:07 am »
I have my own (just me) Pty Ltd business... had looked into sole trader instead but decided the extra hassle was worth it for me and my situation.
I'm happy to talk about what I understand of it all...

Thanks Julian. What made you register for a company as opposed to a sold-trader. We have no problems lodging tax returns etc... realistically it shouldn't be too difficult. I understand there are advantages from a liability point of view, but at this stage the registration costs etc... do add up. Is it the case we can start off as a partnership but then dissolve that and "convert" it in to a business later?

Speaking from experience, don't bring on anyone else unless you REALLY need them. Further down the track you may well end up paying them for doing very little. If you needs funds, try & borrow the funds that you need & then pay back with interest, rather than bringing on another shareholder, even if he/she is willing to lend the funds with no interest.

Excellent advice and something I hadn't thought of. At this stage, start-up costs will be low. We won't be paying rent or having to purchase a significant amount of stock.

I can't figure out if you are saying the business will be based inside or outside of the country. Having done both (and currently inside) there is quite a bit of difference.

All in Australia. I've amended my original post.

Make sure you have a good and concise agreement in place with your companions. Equal shares sound great untill someone is not willing or able to do an equal part of the job (or just stinks at it).

This is actually a point that was raised between all of us and it's something we haven't decided upon yet. It's a work in progress. We don't want to just leave it as equal share and nothing else.
« Last Edit: May 09, 2018, 07:27:11 am by Halcyon »
 

Online tautech

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Re: Starting your own small business
« Reply #6 on: May 09, 2018, 08:00:47 am »
It's a piece of cake here in NZ and you can do it all online in an evening.
Our annual fees are bugger all but provisional taxes and GST payments can catch you out if you're not very careful. On this matter it's best you keep as much control as possible in just one partner's hands initially.

It's just me and the wife just in case I fall off this mortal toil so she can carry on control until the business is sold.

Be fastidious with records and backups, both of financial transactions and customer related info.
This costs.....plan/budget for a dedicated company PC to replaced every 3 years.
Info is valuable.....could cost dearly if you make errors or loose some but on the other hand is valuable should you need to go cap in hand to the banks or at sale, prove the value of the business or its customer goodwill.

Will you be directly importing any goods ?
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Offline Halcyon

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Re: Starting your own small business
« Reply #7 on: May 09, 2018, 09:08:37 am »
Will you be directly importing any goods ?

No. Everything will be obtained through local distributers.
 

Online jmelson

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Re: Starting your own small business
« Reply #8 on: May 09, 2018, 06:56:59 pm »
Since I'm in the US, I can't respond to the tax and legal issues.  But, be sure, as a side business, that you are ready for the HOURS this will take.  Lots of people say that these small businesses take a LOT of time, and they are generally right!

Also, you want to make sure that your "day job" can't make any claims for your IP or other part of the business.  I've heard HORROR STORIES!

I guess I'm a control freak, and I do everything myself.  So, design products, lay out the boards, FPGA programs, assemble the boards with a pick and place machine in my home basement, machine some mechanical parts and I do my own taxes with a commercial program.

But, this allows me to run a VERY small business, with minimal inventory.

Jon
 

Offline ajb

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Re: Starting your own small business
« Reply #9 on: May 09, 2018, 07:34:53 pm »
The good thing about Pty Ltd is that you personally have limited liability - Even if the wheels really fall off this venture, nobody should lose their house (unless you've done something as a director you can be sued personally for...)
If an Australian Pty Ltd is like an LLC in the US, you'll also need to make sure your financial practices keep a clear separation between personal and business assets.  "Piercing the corporate veil", as it's known here, can can expose your personal assets to business liabilities if you haven't maintained proper formal separation.  Generally, it's probably worth you and your partners sitting down with an accountant to make sure everyone knows the basics of financial propriety.

Quote
Since it's a thing with friends - you should still have a formal agreement as to who owns what of the business and how profits should be shared, and how you should work together and resolve disputes - just  to put everything in black and white, in case things go weird one day.
This is probably the most important thing of all.  You should have a written agreement about how profit sharing and decision making is divided among the partners, and make sure that you define things like what happens if one partner wants out (especially in a situation where you don't have the cash to buy out their shares), or even if one of the partners becomes incapacitated or worse.
 

Online nctnico

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Re: Starting your own small business
« Reply #10 on: May 09, 2018, 08:17:17 pm »
Make sure you have a good and concise agreement in place with your companions. Equal shares sound great untill someone is not willing or able to do an equal part of the job (or just stinks at it). Who gets to decide stuff? What if you buy a cheap Rigol to do your measurementts and your brother in arms figures he needs an 8.5 digits Keithley to do his job? Etc. etc...
This is good advice! Also think about rules in case one of the owners dies. It might be a good idea to arrange things in a way that the remaining share holders can obtain the shares from the deseased without much hassle.
There are small lies, big lies and then there is what is on the screen of your oscilloscope.
 

Online vk6zgo

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Re: Starting your own small business
« Reply #11 on: May 10, 2018, 01:33:39 am »
Not to do with the generic "starting a business" stuff, but if you are making stuff, don't get so enamoured by the way you do things that you refuse to improve your product to industry standards.

I worked at a (strangely, quite successful) company that persisted in doing things in the most tortuous way possible.
This entailed strange legacy circuitry which no longer had any function, one of which was a whole subunit full of relays intended to changeover twin PSUs which were no longer used.
Another instance was not checking OEM supplied sub units (automotive multifunction switches) prior to installation, necessitating a partial tear down of the just completed units when the switches were faulty (20% were).
Even when this was brought to Management's notice, they did nothing about it!
(All it needed was a bloke with a DMM to spend an hour every time we got a shipment)

This company got away with stuff because the customers were non technical.
If they were marketing to the Electronics industry, thing would have been different.
Firms who make crap become well known among the technical community, who will do their best to discourage the Boss from buying their products.

This comes across as a rant, but wasn't meant that way.
All I am saying, is every now & then, step back & take a look at your product & production procedures.

 

Offline Shock

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Re: Starting your own small business
« Reply #12 on: May 10, 2018, 03:15:18 am »
The business repairing/refurbing/selling vintage computer parts? It's not like you have kept it a secret on the forum.

It's a big step being a hoarder/collector to actually operating a business. Did you manage to find a cheap oscilloscope to buy yet and get some practice in?
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Offline Halcyon

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Re: Starting your own small business
« Reply #13 on: May 10, 2018, 03:18:31 am »
The business repairing/refurbing/selling vintage computer parts? It's not like you have kept it a secret on the forum.

It's a big step being a hoarder/collector to actually operating a business. Did you manage to find a cheap oscilloscope to buy yet and get some practice in?

Nope, not at all. Good guess though! It's an idea I've had for a few years on and off and have only just now managed to get to know some people well enough who have the necessary technical skills to help me pull it off. I haven't made any public comment or dropped any hints about it. All I will say is that there is a pretty big hole in the market and no one really seems to be filling it.

I haven't yet bought a scope, but it's not something that's necessary for the business. The scope was just for me to play with and learn in my own time.

 

Offline Shock

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Re: Starting your own small business
« Reply #14 on: May 10, 2018, 04:42:46 am »
I'd be surprised if it was a new type of business. You can provide a ton more information to get specific advice without giving out any info, like if it's software/app or an electronics invention, or you're manufacturing or just reselling products etc.

But with regards to partners and employees doing development. If it looks like an easy way to make money, expect your idea to be stolen by them. This is why contracts and NDAs are made (and they are still stolen).

It's hard to get free employees but if it's your idea and they are only supplying X amount of hours of work, you don't want to start throwing out the "partner" word at every opportunity. A good way to lose your business if it turns a buck.
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Offline BradC

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Re: Starting your own small business
« Reply #15 on: May 10, 2018, 04:49:49 am »
If it looks like an easy way to make money, expect your idea to be stolen by them.

I'm helping out some guys at the moment who are filling a niche in the market. They weren't first (I did what they are doing 15 years ago in Dubai), but their methodology, product placement & product quality puts them above all other current players. They *know* that the other guys will catch up at some point, but their philosophy is to stay ahead of the game and bank on their service rather than only the product (always a winning strategy) as a differentiator.

Make hay while the sun shines. Keep your clients happy and the ones worth keeping will stick around.
 

Offline Shock

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Re: Starting your own small business
« Reply #16 on: May 10, 2018, 05:12:40 am »
Feel good story, but I was talking about risks with recruiting partners and employees when starting a niche business. I wasn't saying don't go into business or anything about marketing and customer service (in order to stay competitive).
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Offline BradC

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Re: Starting your own small business
« Reply #17 on: May 10, 2018, 05:21:26 am »
I was talking about risks with recruiting partners and employees when starting a niche business.

Ahh, yeah. That.
Yeah, I brought my (ex) best mate in to help me market a product along with a line of gear we had the agency for. That agency was keeping us afloat while we designed & built our gear (same industry but different an non-competing product line). He fucked off, took the agency and clients with him. We went under. So yeah, be a bit careful and don't go into business with a "mate".
 

Offline Halcyon

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Re: Starting your own small business
« Reply #18 on: May 10, 2018, 06:15:20 am »
I'd be surprised if it was a new type of business. You can provide a ton more information to get specific advice without giving out any info, like if it's software/app or an electronics invention, or you're manufacturing or just reselling products etc.

But with regards to partners and employees doing development. If it looks like an easy way to make money, expect your idea to be stolen by them. This is why contracts and NDAs are made (and they are still stolen).

It's hard to get free employees but if it's your idea and they are only supplying X amount of hours of work, you don't want to start throwing out the "partner" word at every opportunity. A good way to lose your business if it turns a buck.

It's not "new" entirely. There are people doing this for corporate customers every day however we'd be targeting a specific slice of the consumer market which is yet to be captured (at least properly).

I guess where the benefit comes with my team is that each member brings something to the table, but no one person would find it easy to go at it by themselves. We all actually want to work together and we get on brilliantly.

Our initial goal is to make some play money, nothing more really. If it takes off and becomes very successful, we'll revisit the strategy then. We all have full-time jobs and that isn't likely to change any time in the foreseeable future as we're very well remunerated and secure in our positions.
 

Offline David Chamberlain

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Re: Starting your own small business
« Reply #19 on: May 10, 2018, 06:52:10 am »
You will need to decide if you wish to register for GST or not. If you turn over less than $75K pa then you don't have to (with some noticeable exception like Uber), but if you don't, you cannot claim the GST you have paid to your suppliers. If you are going to mainly sell to customers who are likely to be able to claim the GST back, then it is probably best for you to register for GST.

Even if you don't need to register for GST I would do it any way. When I started out I didn't and every business customer I had would call asking where the GST number was on the invoice and me explaining I didn't have one and them getting confused about how they are supposed to pay me because the accounting software they use does not let them... and so on.

I think it just looks more professional to have one and it's a simple process to obtain.
 

Online Mr. Scram

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Re: Starting your own small business
« Reply #20 on: May 10, 2018, 07:01:16 am »
It's not "new" entirely. There are people doing this for corporate customers every day however we'd be targeting a specific slice of the consumer market which is yet to be captured (at least properly).

I guess where the benefit comes with my team is that each member brings something to the table, but no one person would find it easy to go at it by themselves. We all actually want to work together and we get on brilliantly.

Our initial goal is to make some play money, nothing more really. If it takes off and becomes very successful, we'll revisit the strategy then. We all have full-time jobs and that isn't likely to change any time in the foreseeable future as we're very well remunerated and secure in our positions.
That's a potential point of contention. Some of you wanting to grow the business and professionalize while some don't, even though they're essential to succeed.
 

Offline Halcyon

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Re: Starting your own small business
« Reply #21 on: May 10, 2018, 07:03:31 am »
It's not "new" entirely. There are people doing this for corporate customers every day however we'd be targeting a specific slice of the consumer market which is yet to be captured (at least properly).

I guess where the benefit comes with my team is that each member brings something to the table, but no one person would find it easy to go at it by themselves. We all actually want to work together and we get on brilliantly.

Our initial goal is to make some play money, nothing more really. If it takes off and becomes very successful, we'll revisit the strategy then. We all have full-time jobs and that isn't likely to change any time in the foreseeable future as we're very well remunerated and secure in our positions.
That's a potential point of contention. Some of you wanting to grow the business and professionalize while some don't, even though they're essential to succeed.

It might be down the track, however none of us are in a position where we could (or would even think about) leaving our current jobs.
 

Offline EEVblog

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Re: Starting your own small business
« Reply #22 on: May 10, 2018, 07:17:49 am »
I figured there would be a lot of experience on this forum. I'm looking to start my own small business, however not having any experience in this, I'd love to hear from those who have done it.
The business will be based within and servicing clients in Australia only, so I'd need to do some research on the relevant tax rules etc... I have spoken to an accountant already to gain some basic advice.
It will involve a few other people, so it won't be set up as a sole-trader, rather a partnership or a company. It will have no "employees" as such, the partners/directors will be doing all the work and taking a cut of the profit.

I don't know how partnerships work, but a Pty Ltd company requires at least one director and you can't just " take a cut of the profit", the money has to remain in the business.
There are three ways to get money out of a Pty Ltd business:
1) Wages / Salary
2) Directors fees
3) Dividends (directors are shareholders)

All 3 ways impact your personal tax. Taking excess dividends will also mean you will get shunted onto the PAYG system and you'll have to pay up-front for next years "deemed income".
The best way is usually Wages up to $80k/year and then dividends after that.

Pty Ltd accounting will cost you several thousand dollars a year to maintain, maybe under $1k if it's really simple. I pay about $5k a year, but i have huge numbers of import/export stuff to deal with.
« Last Edit: May 10, 2018, 07:33:42 am by EEVblog »
 

Offline EEVblog

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Re: Starting your own small business
« Reply #23 on: May 10, 2018, 07:27:40 am »
Make sure you get your insurance in order and keep abreast of the tax legislation and any changes as they come up.

Get a lot of quotes for business insurance, as if you do anything "weird" like I am, they will just automatically charge you a fortune.

I'm paying about $800/year for full product and personal liability through my broker friend, compared to $3k+ when I got quotes myself.
 

Offline Shock

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Re: Starting your own small business
« Reply #24 on: May 10, 2018, 07:56:11 am »
It's not "new" entirely. There are people doing this for corporate customers every day however we'd be targeting a specific slice of the consumer market which is yet to be captured (at least properly).

Someone needs to handle the finances (or incur the wrath of the tax dept) so you want the specifics wrangled out ahead of time, less headaches later.

I've had to "buy out" an equal partner before and dealing with it a year or two down the track in a profitable business is a nightmare.

Not that I have been in this situation but the problem of an informal partnership would be even worse if you had to go to court, if they had a compelling argument for loss of income or entitlement to the business it could be very costly your end.
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