There are over two million small businesses in Australia, defined as businesses that employ less than 19 people. All in all, small businesses account for 97 percent of all businesses my employee size. Despite the fact that small businesses represent the backbone of the Australian economy, the failure rate of small businesses is also extremely high. The Australian Bureau of Statistics finds that almost 60 percent of new businesses fail within the first three years, and the vast majority of those are small, self-owned businesses.
So why do small businesses tend to fail, and is there a way to avoid it? While there are a variety of reasons for small business failures, not following proper procedures for starting a business can lead to legal and financial problems down the road that can cause unneeded stress for your business. Below, we offer a step by step guide for starting a small business in Australia along with a few resources that can help your business thrive from the day you open the doors to the public.
Step 1: Choose The Structure Of Your Business
Before you start applying for permits and searching for a locale to rent, you will first want to decide on the structure of your business as this will largely determine several important features such as the taxes you have to pay, regulations, and the amount of owner control. The four main options for business structures include sole trader, company, partnership, and trust.
While a sole trader business will give you the maximum amount of control over your business, you will also be individually liable for any financial burdens that might occur. If you choose to register your business as a company, you may be able to avoid large start up loans as you could raise startup capital from investors, though you would lose a substantial amount of personal control over the direction of the company and business affairs.
Step 2: Get An ABN (Australian Business Number) & Register Your Business Name
Once you have settled on the structure of your business, you will need to apply for an ABN and register your business name with the government. Fortunately, this step can be done online through the Australian Department of Industry, Innovation, and Science at this website.
Once you have your ABN and registered business name, you can also register for a website domain. Almost half of Australian businesses have an online presence, and as consumer preference for e-commerce continues to grow, this should be a priority for almost all small businesses. You can begin the process of registering for a website domain here.
Step 3: Apply For Grants To Secure Capital
Unfortunately, many banks and lending agencies make it close to impossible for startup small businesses to get a decent loan. The fact that so many small businesses fail makes many banks hesitant to offer significant financing to help a business get off the ground. Fortunately, there are several government grants that can help you raise a portion of the capital you need to get your business idea started.
You can start your search for government grants at this government website which allows you to browse through grant categories (including low interest government loans for startups). While the specific grants to apply for will depend on your particular business, The Entrepreneur Program is one of the most beneficial grants for startup small businesses and can help you land $20,000 in startup capital.
Furthermore, several grant opportunities are only offered in specific states or regions of Australia, so be sure to check with your local government as well. For example, this current grant opportunity for small business entrepreneurs in Adelaide offers a Small Business Development Fund with potential grant capital of up to $20,000.
Step 4: Register For Taxes
To avoid legal complications down the road, you will also need to register for the correct taxes depending on your business type. Unfortunately, it can be a bit confusing to determine what types of tax your specific business needs to pay. For example, some businesses may have to pay the Fringe Benefits Tax while other will be exempt. You can find a complete list of the different business taxes that you might need to register for here.
These four basic steps will make sure that your small business is registered and compliant with all of the legal necessities. By taking care of the paperwork beforehand, you can focus your energy on creating a successful business and avoiding potentially crippling legal issues down the road.