How Do I Set Up My New Business?

TGB’s Tom Mead addresses some frequently asked legal questions by startup founders, entrepreneurs and new business owners.

Q: Should I establish a company to run my new business, or is some other business structure more suitable?

A: The answer to this question is going to depend on a whole range of different factors, including your individual financial and personal circumstances.  It is strongly recommended that you seek both legal and accounting advice before commencing the business.  Although a company structure carries with it some advantages such as limited liability, there are disadvantages such as greater accounting and compliance costs due to the need to file annual returns for the company.  It is very much a case of getting legal and accounting advice specifically tailored to your situation.

Q: Should I set up a family trust to run my business?

A: Generally, a family trust can be a useful part of your business structure to allow you to legitimately minimise income tax for income earned from your business. Once again, it is important to get legal and accounting advice specific to your situation.

Q: Do I need to register for the goods and services tax (GST) if I am starting a new business?

A: If you expect that your business will have a GST turnover of $75,000 or more in the financial year (ie the period of 12 months starting on 1 July one year and ending on 30 June of the following year) then you must register your business with the Australian Taxation Office (if your business involves providing taxi travel or if you want to claim fuel tax credits you will also need to register for GST).

Q: I am currently working for a company as an employee but I want to set up on my own and start my own business. The new business will operate in the same field as my current job.  Am I able to do this?

A: These days, many companies ask key employees to sign a contract of employment.  The contract of employment usually contains provisions governing whether the employee is able to leave the company and start competing with it in the same area or business.  Contracts of employment commonly include a “restraint of trade” clause by which the employee agrees that, in the event of him or her leaving the company, the employee will not, for a certain defined period of time, and within a certain defined geographical area, compete with his or her former employer in the same kind of business.  Even if there is no such contract in place, an employee will owe certain obligations to an employer under common law which will continue to bind the employee even after the employment relationship has been terminated.  It is important to seek legal advice about your position in this regard.

Q: I am about to start a small business and from time to time I will need a little help from a mate.  Is it illegal for me to ask him to do some work for me for cash?

A: It is not illegal to make payment of wages in cash, however as an employer you have certain obligations under both Federal and State Laws concerning employees.  For example, you must provide to all employees the appropriate PAYG employee declaration for them to complete, sign and return to you.  You must then keep records of all wages, allowances and other payments you make to them and you must keep superannuation guarantee records, including payments you made and records that show you have met your choice of superfund obligations.  You must also keep records of fringe benefits tax calculations (if applicable), worksheets, declarations, elections and supporting details.  In South Australia you must also pay the appropriate WorkCover levy to ensure that your employee is covered for any injury he or she may sustain in the course of his or her employment.

Q: Do I need any special licences to set up a new business?

A: Depending on the type of business it is, you may need a licence.  For example, if you are setting up a cafe or restaurant in South Australia, and you wish to serve alcohol to customers, you will need to apply for a liquor licence from the Office of Liquor and Gambling Commissioner. This will require some further research and a discussion with your lawyer.

For advice about starting up your new business in South Australia, please contact your nearest TGB location.