As more people than ever seek to work from home, they may think about opening their own business to take advantage of the growing digital revolution. If you're in this situation and have discovered just how attractive it might be to operate your own business from your bedroom, what do you need to know about formal structure?
Setting It up
If you've been used to working for another organisation during your life, then you may well have received your money on a weekly or monthly basis from that employer. You would have been registered under a PAYE system, and your employer would have taken care of your tax and insurance obligations. In this case, however, you will have to take on that responsibility yourself, and the first step is to establish a formal structure.
For simplicity, you may decide that you want to be a sole trader from a tax perspective and will not need to set up an entirely separate business entity. In other words, you will trade as a business, although, you will need to register your business name if it is different from your given name. You also need to register an Australian business number (ABN) so that you can interact with government agencies and departments on behalf of your business as needed. This number will be separate from your personal tax identification number.
Some people like to separate the business affairs from their personal life, and, in this case, you may want to set up a limited company instead. This will then be an independent legal entity, and you would be the shareholder but will also need to be identified as the director or company secretary, too.
Starting a limited company is certainly a more involved process, and you will need to both establish the company correctly and comply with certain resolutions. You will need to separate income and revenues carefully and should have a bank account for this purpose, while you will need to lodge an annual return with the tax authorities. You may be able to include yourself as an employee of the company and will account for PAYE, or you can pay yourself a dividend out of the profits of the end of the year, once all the taxes and other obligations have been met.
Whichever structure you choose, make sure that it is set up correctly and that all your affairs are handled properly. It's best to get an experienced accountant on your side who can help to guide you through the process during the early days. For more information, speak with accountants near you.Share