Author Topic: Starting your own small business  (Read 3201 times)

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Offline BradC

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Re: Starting your own small business
« Reply #25 on: May 10, 2018, 08:31:18 am »
I'm paying about $800/year for full product and personal liability through my broker friend, compared to $3k+ when I got quotes myself.

I was paying ~5k and got that down to about 1.2k by talking to the right broker. The funny thing is the underwriters are *exactly* the same, as are the PDS. So for the same product, and the same cover I've saved heaps just by changing broker.
 

Offline Halcyon

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Re: Starting your own small business
« Reply #26 on: May 10, 2018, 09:31:59 am »
Thanks for all the valuable advice everyone.

At this stage, I personally think a Pty. Ltd. company would be a bit excessive for what we are wanting to do. I guess the question remains, if we start this off as a "hobby", which is essentially what it is and it becomes successful and demand for services increases beyond that hobby level, is it possible to then move to a formal partnership and then later a company if demand keeps growing?

 

Offline julianhigginson

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Re: Starting your own small business
« Reply #27 on: May 10, 2018, 11:27:04 am »
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?

firewalling against liability is the main thing - I mostly provide consulting and design contracting services, but I wanted the ability to also provide products... (haven't done so yet) now I still need public liability and professional indemnity insurance, but if anything goes wrong with one of those things when I need it to not go wrong, well, as long as I can show I did my best in setting them up, then it's hard to lose my house, just my business and its assets... As a sole trader there's no firewall. If you screw up your insurance somehow, and things do go wrong, you personally pay for that.

Also, consider that I'd be needing tax help to do my tax as a sole trader anyway - so that ~$800 a year is saving $200/year of what it'd cost to have personal help... and so the cost of being pty ltd is just $600/year.. and that's directly tax deductible from the business anyway - so really it's not that much in the scheme of things.

 

Offline julianhigginson

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Re: Starting your own small business
« Reply #28 on: May 10, 2018, 11:38:21 am »
Thanks for all the valuable advice everyone.

At this stage, I personally think a Pty. Ltd. company would be a bit excessive for what we are wanting to do. I guess the question remains, if we start this off as a "hobby", which is essentially what it is and it becomes successful and demand for services increases beyond that hobby level, is it possible to then move to a formal partnership and then later a company if demand keeps growing?

you can absolutely go from an informal partnership to a formal partnership to a pty. ltd. company as you want... But understand if you are selling a "thing" or a "service" to consumers, you'll probably have a brand you need to build, in order to protect you from inevitable copycats if it even looks profitable.. and to do that you'll want trademarks.... And which of you will own those trademarks? and what happens if they go rogue?

As money is involved, at the very least you should *seriously* consider a written agreement between all the starters on the venture, explaining what you all are meant to do, what you all are meant to get in return, and what to do in the case that you need to mediate over something, or god forbid, come to irreconcilable differences.. Just in this thread there are people telling horror stories.. I've heard of a bunch from people, too... When money is involved,  people can change, and the more formally to structure stuff from the beginning the better.. (well within reason)

it's hard to tell too much more about what you need without understanding details of your venture.. I strongly suggest finding out if WSBC (linked before - they have penrith and katoomba offices) can help you out with a chat about all this stuff before you begin, to get you with some proper professional advice on the business you're actually starting, with details of what the business and directors will actually be doing and what your plans are.

And good luck - starting a business is a hell of a lot of work. :-)
 

Offline Shock

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Re: Starting your own small business
« Reply #29 on: May 10, 2018, 12:00:18 pm »
Thanks for all the valuable advice everyone.

At this stage, I personally think a Pty. Ltd. company would be a bit excessive for what we are wanting to do. I guess the question remains, if we start this off as a "hobby", which is essentially what it is and it becomes successful and demand for services increases beyond that hobby level, is it possible to then move to a formal partnership and then later a company if demand keeps growing?

Talk to your accountant and read the ATO website don't take my advice. But essentially if you are doing business with other businesses you need to be registered and get an ABN as a minimum.

Trading outside of a business you can deal with businesses casually as a supplier but it's limited to $75. I've only ever done this once as I sold a retail store a small amount of stock which was unrelated to the business I was in and I don't think it's very common.

To charge GST you need to be registered and people will also ask for a GST invoice/receipt if you look like a business (as mentioned find it odd if you're not). There are tax advantages being GST registered.

There are also tax advantages running a business from home.  You may be able to claim expenses and losses. For some business you can offset this against person income tax, rent and mortgage.

There is generally a requirement that your business must turn a profit at some point. i.e. your business was established to generate income. If your business is running at a loss continually year on year the ATO will likely step in. The exception being losses generated by investments and you have healthy income. Or at least that was the way it was explained to me, if you look like a sinking ship I'm sure the ATO will let you know.

The thing that will instantly flag you as a business is advertising like one. Not sure about now but in the past I know the ATO used to troll the yellow pages for tax evaders. They check bank accounts and for online activity as well.

When your business starts is largely up to you but you might be automatically considered a business by the ATO when you do business like activity. Say for instance you apply for the Microsoft BizSpark or WebsiteSpark Program, or you share income among your "partners".

Just sitting down and designing something with friends without any purchases, expenses, transactions or income does not necessarily constitute a running business. When your activity is planning to generate income from work (collaborating with others is a big factor) as soon as you're doing transactions the whole game changes and it's regarded as being "in business" so you need to be registered (or be an employee of someone elses) for tax purposes.

Services are regarded the same as physical goods. Buying and selling a couple of cars you restored for a small profit as a hobby is likely fine. Doing remote support jobs for a flat rate fee will likely be seen as a business activity even if for smaller gain.

My advice is read up on how startups fail, and best practices forming partnerships. It's not that expensive either forming a company if you shop around. It sounds like there might be two or three of you involved so far (not that I recommend forming a company with partners) but another way of looking at it is you can split expenses multiple ways lol ;).
« Last Edit: May 10, 2018, 12:04:49 pm by Shock »
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Offline DerekG

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Re: Starting your own small business
« Reply #30 on: May 10, 2018, 03:39:28 pm »
Several other things:

1/ If you do form a company, keep an eye on the Articles of Association. Some will give the chairman an extra vote (in the case of a tied vote of the board). If this is the case, YOU want to be the chairman!

2/ If you design & manufacture a product, get it independently tested by a NATA Certified Laboratory to ensure it meets the relevant Australian Standards. This is often the best way to prevent someone successfully suing you.

3/ Check out Australia's Fair Trading Act. This is Commonwealth Law and applies across all States & Territories. This will help you write your product warranty conditions.

An example on how this affects hot water service manufacturers (& importers). The panel that provided expert advice to the Fair Trading Office determined that a storage hot water service should last for 10 years.

As a result of this advice, if you manufacture (or import) a storage hot water service that fails at the 9 year mark (& provided the customer was not negligent & the installation was carried out correctly), you are required by the Fair Trading Act to not only replace that storage hot water service at no cost to the customer (which includes the fitting costs as well), but also you then need to supply a "new" 10 year warranty on that second hot water service.

These types of costs need to be factored into your selling price.
I also sat between Elvis & Bigfoot on the UFO.
 

Online EEVblog

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Re: Starting your own small business
« Reply #31 on: May 31, 2020, 04:20:21 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.

There are two ways to extract profits from the business, either as wages or as dividends. Your accountant will be able to tell you which one is which based on your regular income.
Also, there some tax benefit in splitting income with your spouse, but you can't do that with dividends unless they are a shareholder.
Just beware with dividends that over a small threshold the tax department will deem you be liable to earn the same dividends next year and will wan the tax up front.

Quote
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.

With partners, just beware of who's actually doing what work and how much. They almost always end up with one person doing the majority of the work, yet all partners would be legally entitled to a share of the profits based on the percentage shareholding regardless if they are a slack arse or their skills weren't needed for a job etc.
 

Online EEVblog

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Re: Starting your own small business
« Reply #32 on: May 31, 2020, 04:23:53 am »
Damn, fooled by spammer necro-post.
Anyway, any update on the business?
 

Offline vk6zgo

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Re: Starting your own small business
« Reply #33 on: May 31, 2020, 05:37:49 am »
I, too, wonder what happened with  Halcyon's business.
I was going to put my 2c in that local Councils like to have their say about what kind of business you are running from home, too.

I was looking at running an Electronics repair business from home, & looked up the Council guidelines.
They had never heard of Electronics, but Computer repair was OK. :palm:

This seems to be quite common.---------back in the early "2000s" Skilled Engineering had seemingly never heard of Electronics Techs, so they put me on the books as an "Instrument Technician".
Bit weird for an occupation which had been around (in some shape or form) for nearly 100 years.
« Last Edit: May 31, 2020, 05:45:41 am by vk6zgo »
 

Offline Shock

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Re: Starting your own small business
« Reply #34 on: May 31, 2020, 05:56:03 am »
There has been a serious lack of the "say thanks" button applied to this thread.  :D
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Offline VK3DRB

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Re: Starting your own small business
« Reply #35 on: May 31, 2020, 11:50:05 am »
I had a Pty Ltd for an electronics business about eight years. The added paperwork is a pain in the arse as is the extra govt fees, but it can be tax advantageous if you earn >= $117K per annum, but not if you earn <$117k per annum. $117K is the magic number at time of writing. I run a electronics business just as a business name and am making more than that, so in retrospect a Pty Ltd would have been better. The way things are going, I might have to turn it into a Pty Ltd. I have had to reject work because I am so busy - for the next few months at least.

In a small business you have to do the books. For a small business, I highly recommend Wave Accounting. It is free and works a treat. After trying Quickbooks and another paid-for accounting package, I was delighted with Wave Accounting. Easy to set up GST etc. Wave Accounting is a medium sized company with in Canada. They make it free so you can optionally put credit card payments through them for a small but competitive fee. But I suggest if you are not that good with finances, you get a bookkeeper to help set it up a chart of accounts for you.

A Pty Ltd offers you no legal protection. If you get sued you can lose your house whether you have a Pty Ltd or not. Henceforth professional liability insurance is a must in any case. If your business is electronics engineering, the premiums are higher than for a programmer because the word "engineer" is used. After shopping around, I found one insurance broker who was quite a bit cheaper than anyone else, underwritten by Lloyds of London.

If you have a Pty Ltd and the government swipes your money from your bank in the event it becomes dormant or you de-register the business, it is hell to get it back. ASIC can force you to re-register the business at your cost just so they can get your money back; and they make you make you go through a mass of the paperwork more than once, at your cost. ASIC is an incompetent bureaucracy. In my case, they leaked my and the other company owner's confidential financial details to an unknown person overseas because they typed in the wrong email address. If the account is just in a business name, you can get your money back more easily if ASIC swipes your money, but your financial details will not be secure as I can testify.

I spent 18 years in corporate life as an employee working for IBM with 350,000 employees, followed by 20 years working for medium and small companies. I am happier working for myself, making a lot more per hour than I ever did as a professional engineer. I do get some social interaction with my clients. Some people feel isolated working for themselves, but I don't have that problem. I have two offices - one with a shared receptionist and one with a lab where I do the electronics design. In the lab I listen to TSF Jazz online or Oak FM. Nothing better. I NEVER want to work for a large corporation again.   

When working in my own business I feel much more accountable than as an employee. I sometimes think about work long into the night and on the weekends. Not so bad because I enjoy what I do. Where if you are a cog in the wheel in a large organisation, your manager has to worry about stuff.

It is definitely a game changer working for yourself. It has its pros and cons. The biggest hindrance to starting a small business is fear of the unknown. Well who'd have thought (besides Bill Gates) this virus was going to hit us. Even as an employee, there is no guarantee of employment. The world is very different to what it was 30 years ago.
 

Online EEVblog

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Re: Starting your own small business
« Reply #36 on: June 01, 2020, 06:13:37 am »
I, too, wonder what happened with  Halcyon's business.
I was going to put my 2c in that local Councils like to have their say about what kind of business you are running from home, too.

Unless it's business that attracts the public, or has massive signage, or medical or some such, or otherwise disturbs the neighbors, they don't care.
There are specific guidelines for this.

Quote
I was looking at running an Electronics repair business from home, & looked up the Council guidelines.
They had never heard of Electronics, but Computer repair was OK. :palm:

Try getting business insurance for being a Youtuber...
Officially I'm a "DESIGN ENGINEERING CONSULTANCY"
 

Online EEVblog

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Re: Starting your own small business
« Reply #37 on: June 01, 2020, 06:23:07 am »
A Pty Ltd offers you no legal protection. If you get sued you can lose your house whether you have a Pty Ltd or not.

Err, it's not that simple.
A Pty Ltd offers financial protection from the business going backrupt etc. If the company goes bust then the creditors cannot touch the directors personal assets.
What you are thinking of involves personal liability, i.e. you personally did something that caused someone harm and they sue you directly, not the company.
Generally they will sue whoever has insurance, if your business has insurance then they sue the business. That's what insurance is for.
It is harder to sue a director personally if you dealt with the business, especially if best practices were used.
 

Offline VK3DRB

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Re: Starting your own small business
« Reply #38 on: June 02, 2020, 12:14:44 pm »
A Pty Ltd offers you no legal protection. If you get sued you can lose your house whether you have a Pty Ltd or not.

Err, it's not that simple.
A Pty Ltd offers financial protection from the business going backrupt etc. If the company goes bust then the creditors cannot touch the directors personal assets.
What you are thinking of involves personal liability, i.e. you personally did something that caused someone harm and they sue you directly, not the company.
Generally they will sue whoever has insurance, if your business has insurance then they sue the business. That's what insurance is for.
It is harder to sue a director personally if you dealt with the business, especially if best practices were used.

True. But if there is no insurance at all, you run at risk. A mate of mine in Melbourne who is a pretty good electronic engineer doing his own thing in a one-man Pty Ltd for 30 years has never had insurance. His attitude is if you show due diligence and are honest, no-one is going to come after you. Besides, this is not the United States.
 

Online EEVblog

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Re: Starting your own small business
« Reply #39 on: June 03, 2020, 03:33:08 am »
A Pty Ltd offers you no legal protection. If you get sued you can lose your house whether you have a Pty Ltd or not.

Err, it's not that simple.
A Pty Ltd offers financial protection from the business going backrupt etc. If the company goes bust then the creditors cannot touch the directors personal assets.
What you are thinking of involves personal liability, i.e. you personally did something that caused someone harm and they sue you directly, not the company.
Generally they will sue whoever has insurance, if your business has insurance then they sue the business. That's what insurance is for.
It is harder to sue a director personally if you dealt with the business, especially if best practices were used.

True. But if there is no insurance at all, you run at risk.

Of course, but it's far easier to sue an insurance company for a claim than it is to sue an individual and take their house.

Also, if you do something criminal or deliberately negligent, then no insurance is going to save you because you will be personally liable.
For instance, if you are an engineer at a company (or your own company) and you design something deliberately that you knew could kill someone and it does, you are personally liable and will face criminal charges. A company I worked for once had a criminal lawyer come in and explain this to everyone as a warning to always use "best practices".
 


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