Legal Requirements for Starting a Business in Australia
Starting a new business venture can be both exciting and worrying. It is not easy to be your own boss as it comes with a long list of things that have to be done to get your venture off to a flying start. But the most important thing for you to do is to ensure you are legally compliant.
Here’s our condensed checklist to ensure you understand the general legal requirements for starting a business in Australia. However, you may want to also seek legal advice to ensure your business is legally compliant with regulations specific to your industry.
Legal Requirements for Starting a Business in Australia Checklist
Decide On your Business Structure
Before you start setting up your business, you must decide on your business structure as this will affect what you need to register for.
- Sole Trader
As a sole trader, you are your business’s only owner and manager, responsible for its success or failure. This business structure is the simplest and cheapest to set up, but you are also exposed to more risk than with other types of businesses.
There are three primary types of business partnerships: the general partnership, the limited partnership, and the incorporated limited partnership. Each has distinct characteristics regarding the level of liability and management responsibility assumed by the partners.
A general partnership is one in which all partners share equally in both the profits and losses of the business and its management. This means that each partner has unlimited personal liability for any debts or obligations incurred by the business.
In a limited partnership, there are both general and limited partners. The general partners have full management control of the business and share its profits and losses equally. However, their personal liability is limited to the amount of money they have invested in the partnership. The limited partners are usually passive investors who do not actively manage the business daily. Their personal liability is also typically limited to their investment amount.
An incorporated limited partnership (ILP) is similar to a regular Limited Partnership (LP), except that with an ILP all partners have some form of limited liability protection.
A company is a legal entity that is separate from its owners. Companies are more complex to start and run than other business structures and have higher set-up and running costs. To form a company, you must comply with the obligations under the Corporations Act 2001. This includes having shareholders who own the company and directors who control its operations. The advantages of a company include limited liability for shareholders and wider access to capital. However, companies also have several ongoing obligations, such as lodging an annual tax return with the ATO and completing an annual review. Directors of companies must also make a declaration of solvency each year.
Register for an ABN
All businesses require an Australian Business Number (ABN), which is issued by the ATO for any government services like tax. The ABN identifies your business and is a unique 11-digit number. It is required for carrying out any business activity in Australia such as invoicing claiming GST credits, getting a .au Australian domain name, and even opening a business bank account. Non-Australian residents can also apply for an ABN by providing a Tax File Number, Proof of Identity, and confirmation that the intended business is in Australia.
Register for an ACN
Not all businesses need to register for an Australian Company Number (ACN), but doing so means your business is a separate legal entity from yourself, unlike a sole trader. You can also make use of other privileges, such as corporate tax rates or limited liability.
The ACN is issued by ASIC (Australian Securities and Investments Commission). However, all businesses require an Australian Business Number (ABN).
Before registering your company, a few preliminary activities must be taken care of. You must first decide on your business structure, the name of the Company, the business address, and the office holders. The last point is especially critical for foreign companies as the rules stipulate that at least one director should be a resident of Australia.
You can start the company registration process directly with ASIC, or by using a government-registered agent like Namecorp. By using Namecorp you can register your ABN with the ATO, and your ACN with ASIC in one single application and be sure you haven’t missed any steps.
After processing the application, ASIC will issue an ACN (Australian Company Number). You will need to get your ACN before you can get your ABN and tax registrations.
Register Tax File Number (TFN)
A TFN is needed to file a tax return for your business unless you are a sole trader. You can apply for the TFN along with the ABN.
Register for Goods and Services Tax (GST)
If you forecast your business to have an annual turnover of $75,000 or more, you must register for GST. If you meet this limit whilst trading, you have to register within 21 days.
Register Your Business Name
You will need a business name if you plan to trade under any name other than your personal name. After the ABN has been registered, you can also register your business name with ASIC. Or as registered ASIC agents, we at Namecorp can help you with that too.
You will need
- Either an ABN or its application reference number
- An address where you will receive official notices and for service of documents. This address will be shown on the Business Names Register.
- A primary business location where no PO box address is allowed.
- An email address
After completing all the formalities, it takes around 2-5 business days to receive confirmation of the business name registration. Register an exclusive business name as a trademark with IP Australia. Or we at Namecorp can help you with registering a trademark too.
Once you get the ABN and business name, you can start your business. However, a word of caution from us. Even after registering your business name, do not start trading until you receive the business name certificate. This is because until that happens, ASIC can always intervene somewhere in the process and say that everything is not right. After you get your business name certificate though you are all good to go. You will also need a business name certificate to open a bank account as well. When you register through Namecorp, we will send you all relevant documentation, and all certificates will be kept safe in your portal.
Buy a Domain Name
Although not a legal requirement, most people expect to be able to buy or find a business online, so a website is essential nowadays. And to get a website, you need a domain name. This is the name of your website.
After registering your business name, you can also register for a domain name. ABN or ACN is required for a .com.au domain for your business, but simple checks are enough for a .au domain extension.
You can also check available domain names and register your domain name with Namecorp. As part of this, we offer free website design.
Open a Bank Account Locally
If you are a sole trader, having a business bank account is not a legal requirement. However, you will find it much easier to prepare your tax return if you do have a separate bank account for your business.
For companies, you are required to have a business bank account.
If you are running your business from foreign shores, you will have to visit Australia to complete the bank’s verification process (KYC). You can also contact us at Namecorp to streamline the account opening procedures.
Apply for Industry-specific Licenses and Permits
There are several permits and licenses in Australia that are industry-specific. Check what is required for your line of business in each state.
Going through the whole process of starting a business in Australia can be quite complex and time-consuming. You need an expert to navigate it for you. Register through Namecorp and let us complete everything in one easy step, and we provide 24/7 support if you need help with setting up your business.
Some forms of insurance are required by law. These are:
- Workers’ compensation insurance if you have employees.
- Third-party personal injury insurance is compulsory if you own a motor vehicle. (This is often part of your vehicle registration fee).
- Public liability insurance covers you for third-party death or injury and is compulsory for certain types of companies but recommended for all.
There are many other types of insurance available to businesses, each with its own unique purpose, and you should consider whether it would be useful to you in your field.
- Professional indemnity insurance is important if your business offers consultancy or services and covers damages and legal fees in the event of a breach of professional duty, such as poor advice or an error in services.
- Business insurance protects equipment and stock from damage.
- Business interruption insurance covers costs incurred when business is disrupted due to unforeseen circumstances.
- Management liability insurance protects those who run the company against risks associated with mismanagement, such as fines, penalties, OH&S issues, unfair dismissal, and breaches of duty.
- Cyber liability insurance protects against hacking and data breaches, and tax audit insurance covers expenses incurred during an audit or investigation.
Help to Get Set Up
Going through the process of starting a business in Australia can be quite complex and time-consuming. Don’t be afraid to seek expert advice to make the process easier for yourself.
Register through Namecorp and let us complete everything in one easy step, and we provide 24/7 support if you need help setting up your business.
Disclaimer: All information provided on this webpage is general information about our business in Australia, and products and services. Nothing on this webpage is intended to be professional advice and should not be relied on as such. You should obtain specific financial, legal, or other professional advice before relying on the content of this webpage. By not seeking such advice, you accept the risk that the information on this webpage may not meet the specific needs of your business. Our liability is limited to the maximum extent permitted by applicable law in accordance with our website terms and conditions.