Setting Up as a Sole Trader: Where to Start
As the most basic business structure available, being a sole trader is a convenient and logical option for those who are just starting out in the world of small business. It is cheap to begin and fairly straightforward to understand, though there are some potential pitfalls and snags that can arise if you are unfamiliar with the process of starting out.
Learning how to navigate the nuances of being a sole trader, however, will allow you to start up your business more easily. You will be able to start bringing your business ideas to life and begin your road to success through entrepreneurship. Best of all, as a sole trader, you will be in full control of all aspects of your business.
However, being a sole trader does not mean that you need to do all of the tasks in your business by yourself. You are still able to hire a team of staff to help you bring your vision to life or you can stick with accounting software for sole traders to help you keep your books on track.
Let's look at some of the specific things that you need to know about how to start out as a sole trader.
Register The Name Of Your Business
Make sure that you apply for the name of your business with the relevant national authorities. You want to be sure that your business name is something meaningful but also simple to understand. Most importantly, however, registering your business name will make sure that it is unique to your business and will not be infringed upon by future entrepreneurs.
Apply For An Australian Business Number (ABN)
For years, businesses in Australia have been required to apply for an ABN in order to legally operate. This number how the Australian Taxation Office and other relevant government agencies will identify your business. While it may seem like a trivial detail, it is important that you go through the steps of applying and receive your number before you start your business. The ATO places harsh penalties for those who use incorrect ABNs or use the ABNs of another business. If you are not prudent, then your sole tradership may dissolve before it even starts.
Register For The Goods And Services Tax (GST)
Once you have an ABN, you will need to register for paying GST if your revenue as a business exceeds a certain threshold. At the moment, this threshold is $75,000 or more. Once you have reached this amount (calculated as gross income minus GST), you will need to contact the ATO by phone or complete the documents provided online.
If you fail to register for GST within 21 days after passing this threshold, then you may be hit with some form of penalty from the ATO. This can include the need to pay GST on past sales that you made since the date you needed to register, even if you did not charge GST on the price of those sales. With this in mind, make sure that you are smart about the process and go through the necessary steps to register before your business hits the $75,000 mark.
Get Down To Business
Once these legal requirements are fulfilled, you will be able to start bringing your business ideas to life in earnest. Knowing that you have all of your legal bases covered will provide you with the security that you need to move forward with confidence.
Make sure that you have an effective business plan prepared and be confident about how you will market your product to the masses.