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  • #975727
    ds23
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    Hi everyone,

    I am so glad I found this website. It is a fantastic resource that I will be sure to visit often.

    I’m 22 years old and I’m preparing to start a new business (in the Information Technology industry). I currently work full time (also in the Information Technology industry) but I’d like to establish a successful company outside of my regular job. Initially it will be run from home when I am not working, but my dream is for this business to be successful enough so I can eventually move to running it full time.

    I’ve got some things that I’m not sure on so it would be great if you could help me out.

    – I will register as a company as I think that is the best option for me. Can you confirm whether I need to register an ABN first and then apply for an ACN? Or is it the other way around?

    – Regarding the completion of all financial documents myself, how difficult would it be for someone who has only limited accounting experience (I studied it briefly at University)?

    – Do I need to technically pay myself a salary even though I will be the only employee at the beginning? What about superannuation?

    – Can all startup related expenses such as domains, logo designs, computer equipment and registration fees (ACN, ABN etc.) be claimed as tax deductions?

    I apologise if any of these questions have been asked before. I did a search but none of them seemed to exactly fit my questions.

    Thanks very much.

    #1076099
    MyGreatIdea
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    I can only answer the first question. When you register your company it will receive its own ABN and ACN and you will be notified of the numbers.

    I’m sure others will be able to answer you other questions.

    Good luck in your venture into business !!

    Wendy :)

    #1076100
    Dane Pymble
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    Hi

    Regarding the other points:

    – Regarding the completion of all financial documents myself, how difficult would it be for someone who has only limited accounting experience (I studied it briefly at University)?

    Can i first ask why did you think a company was the best option for you? I am not saying it isn’t but am just interested in your reasoning.

    To answer this question without knowing you is a difficult one but suffice to say I have been involved in various businesses for nearly ten years including sole trader, partnership, Pty Ltd Companies & Public Companies and it is beyond me. My accountant looks after all this and I think I save a lot more as a result of having a professional look after it.

    If you are choosing a Pty Ltd company as your ownership structure be very careful when taking out money from the company as you may run into a Division 7A Loan issue which is not something you want to to be exposed to.

    Do I need to technically pay myself a salary even though I will be the only employee at the beginning? What about superannuation?

    No you don’t need to pay yourself a salary and if you don’t pay a salary to yourself you will not need to pay super. Remember though my point above. Be very careful taking money out of the company for your own personal use.

    Can all startup related expenses such as domains, logo designs, computer equipment and registration fees (ACN, ABN etc.) be claimed as tax deductions?

    Essentially in a company structure all profits are taxed at the 30% Company Tax Rate. Most of those expenses are deductible expenses. I am not accountant so I can’t give you a definitive answer on that as I believe some expenses are capitalised, non-deductible etc. If you make a loss in any given year you can carry that forward to the next year.

    I have written an article on Small Business Bookkeeping that may be of use to you at this early stage in your business’ development. In particular for you it goes into the different types of business structures as well as the process involved from registration right through to lodging end of year accounts. Some of what I discuss you might find capable of handling yourself and/or come to the realisation that the piece of mind you get from outsourcing this crucial responsibility could end up saving you a lot of money in the long run.

    Best of luck to you and your business:)

    #1076101
    SamanthaE
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    ds23, post: 96059 wrote:
    – I will register as a company as I think that is the best option for me. Can you confirm whether I need to register an ABN first and then apply for an ACN? Or is it the other way around?

    – Regarding the completion of all financial documents myself, how difficult would it be for someone who has only limited accounting experience (I studied it briefly at University)?

    – Do I need to technically pay myself a salary even though I will be the only employee at the beginning? What about superannuation?

    – Can all startup related expenses such as domains, logo designs, computer equipment and registration fees (ACN, ABN etc.) be claimed as tax deductions?

    Such a loaded question – sorry but its going to be long…. Please remember that this is not legal nor tax advice and you should seek professional advice for your personal circumstance :)

    1. Why do you want to be a company in the first instance? It costs more money to maintain? If you start as a sole trader you can always change this later on. But if you are adamant in setting up as a company, you can either pay to get your accountant to set all this up and they usually provide all the paperwork (they have kits) including certificates and constitutions, etc. If you want to do it yourself, ACN from ASIC when you register your company. Once you have your certificate of registration, ABN, TFN, GST, PAYG registration can all be done online on Australian Business register (http://www.abr.gov.au). You will need to pay your company fee every year even if you don’t trade, as well as lodge nil tax returns (costs that are not necessarily there when you are a sole trader). Also, don’t think that it would be worth your time registering for GST until you reach the threshold.

    2. Completing your own financial documentation should not be that difficult if it is basic information. I would recommend that you pay money to get it setup correctly and get some basic bookkeeping training. But if you will be working full-time to start with, it may be a better use of your time to outsource this. Again, I don’t think that you should register for GST until you need to…

    3. In regards to paying yourself, the easiest way is to pay yourself formally if its a company – taking out the appropriate tax and super. Also remember, if you pay over a certain amount (in NSW it’s approx $7500) you will also need to take out workers compensation insurance. Also, you need to take into consideration your full-time wage so that you don’t have a huge tax bill at the end of the year. Be careful if you are just taking money out.

    4. Get tax advice on what is tax deductable for a startup. As Dane mentioned, some of these expenses are capitalised and are not deductable.

    5. Just some other things to think about – as an IT provider, you may need to consider a range of insurances, such as public liability and professional indemnity insurance. These can be a bit costly.

    Hopefully this provides some food for thought. I think that you should sit with your accountant and sort out the best structure for you.

    Good Luck with it all :)

    Sam

    #1076102
    ds23
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    Dane Pymble, post: 96063 wrote:
    Hi

    Regarding the other points:

    Can i first ask why did you think a company was the best option for you? I am not saying it isn’t but am just interested in your reasoning.

    My reasoning is:
    – it provides me with maximum protection from being personally liable for the business
    – it allows me to easily add a second director in the future (which is a possibility in my case)

    Although I am not certain if these things can be managed in a sole trader arrangement.

    Another thing, do I need to be a company in order to obtain a trademark on my business name? My plan is to trademark xxxxx but my trading name would be xxxxx Studios Pty Ltd.

    Also, this may seem like a silly question, but is it absolutely necessary for me to have an accountant? Would it be impossible for me to complete all financial matters myself? If not, do online accountants exist in Australia (specifically Melbourne)? As I mentioned I work full-time and it really won’t be possible to visit one face-to-face.

    Thanks once again.

    #1076103
    MyGreatIdea
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    ds23, post: 96094 wrote:
    Also, this may seem like a silly question, but is it absolutely necessary for me to have an accountant?

    A good accountant does so much more than just file your tax return each year. They are an investment, not an expense. IMHO a good business is one that has a good accountant.

    As I mentioned I work full-time and it really won’t be possible to visit one face-to-face.

    Not even for an initial meeting?? Find the time, make the time, beg, borrow or steal the time. And build a relationship with them. The time you save in the long-run will be more than worth it.

    Wendy :)

    #1076104
    ds23
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    Couple It, post: 96104 wrote:
    A good accountant does so much more than just file your tax return each year. They are an investment, not an expense. IMHO a good business is one that has a good accountant.

    Not even for an initial meeting?? Find the time, make the time, beg, borrow or steal the time. And build a relationship with them. The time you save in the long-run will be more than worth it.

    Wendy :)

    I agree with you however at this early stage my funds are quite limited. What I’m planning to do is start things off myself then as things progress I will hire an accountant.

    If I purchase a copy of MYOB will that get me through the initial stages of financial requirements?

    #1076105
    MyGreatIdea
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    If funds are limited, I would use Excel for your record-keeping. You can always upgrade to an accounting software later.

    Check out Record Keeping Essentials on the ATO website. Then you know you’re on the right track !

    Wendy :)

    #1076106
    ds23
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    Couple It, post: 96108 wrote:
    If funds are limited, I would use Excel for your record-keeping. You can always upgrade to an accounting software later.

    Check out Record Keeping Essentials on the ATO website. Then you know you’re on the right track !

    Wendy :)

    Thanks so much for the resource.

    Something else I just came across on that website: even though I will be conducting my operations from home I won’t actually have anyone else on the premises. Do I still need to follow the guidelines at http://www.business.gov.au/Howtoguides/Startingabusiness/Pages/Startingahomebasedbusiness.aspx?

    #1076107
    DanielM
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    Are you using a website for your new venture?

    #1076108
    ds23
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    DanielM, post: 96111 wrote:
    Are you using a website for your new venture?

    Yes, I have registered (some) of my domains already. The business will be conducted through a website.

    #1076109
    ds23
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    Another question I have:

    http://www.business.vic.gov.au/BUSVIC/STANDARD/PC_50052.html states that “A company is subject to taxation in its own right, paid quarterly to the Australian Taxation Office.”

    What does this mean exactly? I understand a company needs to lodge a tax return once per year, but what do I need to pay quarterly?

    Apologies for the numerous questions…

    #1076110
    AgentMail
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    Hi There,

    The questions you are asking is exactly why you should have an accountant. I honestly believe that whilst you say you have some experience in tax, the real world is very different, and you will avoid a lot of mistakes by using one. I think this is especially pertinent if you want to go down the pty ltd route.

    It does not cost the earth to work with one, and I think you will be glad you did.

    #1076111
    TehCamel
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    hi ds23,

    I’m embarking on a similar scenario to you. Here’s what I’m doing. It may, or may not, be beneficial to you. I don’t know exactly what your target market, or your services, are.

    I’ve just returned from the UK, so instead of going back to work, I decided to just give it a whack. While in the UK, I did some freelance work (http://www.freelancer.com) and registered an abn and business name in that regard. I’m only a sole trader for now – my accountant told me it’s not really worth running a company until my turnover is closer to 100K.
    Im also not registered for GST yet, and having a discussion with my wife about it at the moment. all my income is taxed at my personal tax rate. basically – I just do one tax return. If I had a company, I’d have to do the company, and then my personal one as well.

    as a sole trader, my simplistic explanation is, the business income is actually my income, so I can make drawings at any time. (Obviously, with the relevant entries in the books.) I don’t have to pay super on those drawings though. I can make super contributions, and there may be tax breaks.

    I’m using Saasu for accounting at present – the free version offers 20 transactions a month, which is enough for me at this point. If I was to exceed that limit, I’d have to consider whether I wanted to pay them a monthly fee, or just purchase quickbooks/myob.

    there are definitely reasons why a company might suit me better in future – the protection of personal assets is definitely one that’s strong in my mind. Also, hiring staff. If I was to hire staff, I’d definitely move to a company structure.

    Remember to keep your business and personal bank accounts separate!

    #1076112
    Dane Pymble
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    ds23, post: 96094 wrote:
    My reasoning is:
    – it provides me with maximum protection from being personally liable for the business
    – it allows me to easily add a second director in the future (which is a possibility in my case)

    Although I am not certain if these things can be managed in a sole trader arrangement.

    Another thing, do I need to be a company in order to obtain a trademark on my business name? My plan is to trademark xxxxx but my trading name would be xxxxx Studios Pty Ltd.

    Also, this may seem like a silly question, but is it absolutely necessary for me to have an accountant? Would it be impossible for me to complete all financial matters myself? If not, do online accountants exist in Australia (specifically Melbourne)? As I mentioned I work full-time and it really won’t be possible to visit one face-to-face.

    Thanks once again.

    Your reasoning is quite valid in respect of registering a company to limit personal liability and/or add Directors in the future, it is just that there is an additional cost involved albeit only about $200 for ASIC’s annual fee.

    May I stress once again though if you go down this path, particularly if you do it without an accountant be VERY CAREFUL about drawing funds out of the company for personal use. Put simply money that goes into the company is no longer your money, it’s the company’s, even if you are 100% owner of it.

    Without knowing your personal situation I don’t want to comment too much on whether you can meet with an accountant or not but rest assured you aren’t the only one around here with a full time job trying to launch a business on the side whilst still finding time for an accountant (wink wink!!).

    For example my accountant is a mate of mine so we do see each other socially however I very rarely discuss with him my accounts. All the work I do with him is via email/phone. I send him paperwork when he needs it and he does the rest. (We are based in Sydney so no help in your situation).

    One thing I might suggest is worth looking at is a combination of Shoeboxed & Xero.

    You will find that a lot of the legwork can be done by having your receipts scanned to Shoeboxed and linking it to Xero where you manage your accounts for preparation of end of year tax returns and/or BAS. Getting all of that done yourself will significantly reduce the cost of an accountant.

    Check out those websites if you want more details.

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