4 key steps when setting up a business

ABN, GST, TFN. Setting up a business can be a minefield of confusing acronyms. Here's what they all mean, plus four key steps you should take to get started on the road to success.

What we'll cover

1. Choosing and registering a business name
2. Other business registrations such as ABN and ACN
3. Goods and Services Tax (GST)
4. Your business banking options

 

1. Register a business name

If you’re a sole trader, you may simply wish to trade under your own name. But that doesn’t stop you from having a snappy and memorable ‘trading as’ business name. Otherwise, you'll need to consider an appropriate company name.

 

Think about making your name catchy, easy to recall, and logical to spell (so customers can Google you). Then:

1. Check the National Names Index to see if the business name you want is available.
2. If you're a sole trader, partnership or trust, register your business name in each state and territory you intend to trade in. A registered company does not need to register a business name.
3. Register a domain name that's the same or similar to your business name.

 

2. Apply for an ABN, and potentially an ACN and TFN

When you start a business, the applications and registrations you have to make will depend on your business structure, e.g., sole trader (when it's your own business), partnership (when you have a business partner or more than one), company, trust, or other. Whatever your business model, the first thing to consider is your ABN.

 

ABN:

An Australian Business Number (ABN) helps identify your business in public records and supports interactions with banks, the tax office (for GST registration), and other Government departments. If you're required to be registered for GST (see later) you must have an ABN. But even if you don't have to charge GST, you should still feature an ABN on purchase orders and invoices – otherwise those paying you may be obliged to withhold tax at the highest marginal rate.

 

ACN and TFN:

If you plan to operate as an incorporated entity or limited liability company, it will need to be registered with the Australian Securities and Investments Commission (ASIC). ASIC issues an Australian Company Number (ACN) for use in all business transactions. You need this before applying for an ABN.

 

Additionally, partnerships, trusts and companies need a separate Tax File Number (TFN) to do business. Sole traders use their personal TFN when dealing with any business tax matters.

 

You can apply for an ABN and TFN through the Australian Business Register.

3. Register for GST

If you think your business will earn $75,000 or more, you'll need to register for GST (Goods and Services Tax) through the Australian Tax Office (ATO). Exceptions are non-profit organisations Their GST turnover threshold is $150,000.

 

GST matters can vary by business type but in broad terms, the 10% GST you charge customers is generally offset against any GST you incur in doing business. Then any difference is calculated when completing your business activity statement (BAS).

 

There are a few other reasons why businesses might register for GST. Check with your tax adviser about your particular situation.

4. Open a separate business bank account

Many business owners find that tax time can be simpler if you separate your business income and expenses from your personal finances. Plus, separate accounts give you more control of your cash flow with better visibility of ways to cut costs and increase profits.

 

Then if you choose a business account rather than a personal account, it may include extra features that support your operations and accounting. 

 

What should I look for when opening a business bank account?

Some things you may wish to consider and compare include:

• The way you mainly bank, such as all online or by app, or mostly in branch
• Transaction fees and other costs
• The services you'll want, such as connecting to accounting software
• The ability to link your account to a credit card payment taking facility such as the EFTPOS Air mobile app
• Added value features designed specifically for small business owners.

 

With Westpac for example, you can choose between a $0 monthly fee business account (Business One)  and an added value business account  (Business One Plus) that gives you access to exclusive discounts on popular business products and services. To simplify financial management and bookkeeping, you can connect your account to accounting software such as MYOB and Xero.