Should I register my own Company? Should I run a business in my own name as a Sole Trader? Yes it can be VERY confusing if you are an individual or a small group of people wanting to get into business if you don’t have the right understanding of conducting business in Australia.

These are questions that have been running in my head for some time, and I’ve finally taken action. If you are considering registering your own business or company, and are TOTALLY confused by the process, I’m hoping this article will help.

Warning:

I’m definitely not qualified to give advice on this topic – so any information contained within this article is for information only, I would suggest seeking your own advice before taking action.  I do not guarantee the validity of any of the information contained within this post.

The Basics:

If you want to form a business in Australia, then you have the following three options:

1.       Registering  as a Sole Trader

2.       Registering a Partnership

3.       Registering  a Company

Register as a Sole Trader

Let’s get this straight, a sole trader is NOT a company. It’s a business that is solely owned by you and you only. “You” are the business. You are legally reliable for anything that happens in your business. Yes, that means debt collectors may take away your precious couch and TV if you get into some serious debt. If that doesn’t worry you, it probably is one of the easiest ways to start a business.

Naming your business

As a sole trader, you will have two options when it comes to naming your business. Firstly, you can register your own name (by signing up for a free ABN), or registering a business trading name if you would rather not trade under your actual name.  However, business names aren’t free! To register a business name, you’ll need to sign up for the name dependent on what state you’ll be doing business in.

Here’s a list of sites

• Business name registration in Queensland
• Business name registration in New South Wales
• Business name registration in the Australian Capital Territory
• Business name registration in the Northern Territory
• Business name registration in South Australia
• Business Name registration in Western Australia
• Business Name registration in Victoria

Personally, I chose against registering a Sole Trader business. Later on, it will become clear as to why. However, if your capital is very limited and you feel that you need to make a start, a Sole Trader business might be your best option.

Advantages:

• Cheap to setup
• Less paperwork (always a good thing!)

Disadvantages:

• You ARE directly liable for everything
• Your business will die with you

Register as a Partnership

So, you want to go into business with a business partner? You might assume that a partnership refers to two people running a business. In fact, you can have up to 20 partners. However, the inherent issues with a Sole Trader business also carry over into a Partnership.  To put it bluntly, each partner puts their life on the line for each other, as one bad business decision will affect all partners. Not necessarily a nice thought!  A partnership may work in your example, but make sure your partners all compliment the business and work in harmony. You don’t want things to end in an ugly mess.

Advantages:

• Cheap to setup
• Wider pool of resources

Disadvantages:

• Your bad business decisions can affect your partner
• Their business decisions can affect YOU
• The partnership may end if a partner leaves the business

Company Structure (Pty Ltd, ACN)

Bingo! That’s the structure I’ve registered. I believe there is a lot of unnecessary assumed complexity in registering a company. To be honest, the entire process was complete in about 20 minutes and a few minutes later I received all the paperwork by email. I was a little bit shocked by how fast it was approved!

If you want to be in your market long term (and you expect your business to boom), then you should ultimately aim to transition your business to a company structure if you didn’t initially sign it up as one.

The best explanation I’ve heard of a company structure was from Ian Daley (investor / Tax adviser, headed ITP Income Tax Professionals in Queensland for 15 years) who indicated:

“A company is a person. It’s a separate person that cannot die”.  So unlike a Sole Trader or a Partnership, you are basically hiring a security guard to stand in front of you at all times, with the ability to instruct them what to do, and let them take all the hits for you. In order words, you limit your liability.

Advantages:

• You are not DIRECTLY liable, giving you more peace of mind if legal issues arise
• It is now very simple to setup

Disadvantages:

• Increase in the amount of reporting requirements
• Costs more to setup

My deciding factors:

Ultimately, I knew that a company structure was my long term goal. This limits my liability, however forces me to take what was perhaps a ‘hobby’ to something a little more serious knowing that I have to work with the best interests of my company at all times. Little factors of motivation like this ARE important! With the amount of services now setup to fast track the application process in setting up a company structure, you can now register your own company is 20 minutes online (yes, you will pay a little extra for the service).

Getting your business / company structure together isn’t easy. It takes time, knowledge and money. Take the time required to learn the different structures so you’ll be happy with your business structure from day one. This is in no way to be considered a comprehensive guide, and as I said in the beginning, should be taken as information only.

I would highly recommend you research some of the following sites to gain a further understanding:

• ASIC – Starting a Company in Australia
• Passion Computing – Starting a New Business in Australia