Start a New Business: The Setup Stage
Hi everyone, today I have a very special guest with me today. Who is my wife, and also business partner, and then Shaneel and Shaneel has actually worked with me. She's the CFO. She's also started a few businesses of our own and also started a few businesses and myself and today I'm going to be talking about just basics around starting up a business the setup stage mostly around that setup stage and in the experiences we've gone through with not only our own individual businesses but also the hundreds of clients that we deal with on a day to day basis.
This is a podcast, that is for those entrepreneurs or people trying to be a business owner, but they just don't really have confidence in what they've done so far, or they haven't started, what they should be doing in the initial stages of their business, then we're not going to go into the actual strategic planning of setting up a business, it's more so around the setup, the structure and anything around that that is crucial to making sure that we have the right foundations. So yeah welcome.
So, I guess I just want to have a quick chat, and just discuss, maybe firstly, some of the businesses that we've started. So obviously we had, we have this one here which is a way of accounting, but over and above that we also have the financial planning side. Yeah, we've got insurance as well and we also have finance and mortgage broking. Yeah, and over and above that we also have set up a few ecommerce store she all had her own matcha tea business. Then we also set up a watch business where we were importing watches, designing watches here in Australia, from China, which we sold off probably six years ago now. Yeah, yeah. So in terms of setting up businesses and making sure that we're ticking all the boxes, I'd say that we've had a bit of experience
in that. And not only that, going through multiple business setups with hundreds of clients has kept us in this area. So, I guess, in terms of choosing the right structure this is the first topic that I want to discuss because a lot of clients that we meet with. There's always that issue of basically running in blind and just starting that business and automatically just getting an idea from the ATM and not looking into the ins and outs of what structure of that they should be in.
So, what do you think about the how people should be structuring your business and what are your experiences and so people don't necessarily always have a good idea so you can hear that stains in the background that's Abdo around the things that they should be considering when they, when they're looking at setting up the structure initially because there's lots of areas that you have to look into. And it comes down to your personal circumstances, it could be even making sure that you're set up in the right structure to make sure that you're doing everything you can to minimize your tax.
Yeah, so it all comes down to the person really, And what your, your situation is. Alongside that we have there are a few points that have put the idea of. So the first point is aligning the structure with your personal circumstances and goals. This is one that a lot of people forget about straightaway, they think about just the business side I think about the legalities and asset protection but I want to make sure that when you are setting up business, it's in line with your goals, so sorry that we've just got our little puppy with us. So yeah, setting up your personal circumstances, we've been a lot of your goals. So for us. Using our example, we want to make sure that from the start we really were trying to identify what we wanted to do let's say New Wave Accountants the business this is a, we're not looking at this as a short term business, we're not looking at this as something that will immediately or even long term sell down the track. We're looking for the longevity legacy and making sure that we're continuously growing the business so that was a crucial factor in determinin
g what structure was right for the business itself. Right. And then you're also looking at circumstances, if we have business types. Are you able to, I guess dive deeper on our circumstances with our other businesses where we do have business partners, and you know the considerations we have to make there.
Yeah. So, if you have business other business partners, Obviously you have to consider both, both parties in the
setup initially and what your long term goals after for where you want the business to go. There's also things that you have to consider if you have business partners around making sure that you're putting in proper shareholder agreements if you're setting up a company as well so that it's all outlined from the get go, what everyone's duties are basically. And it just makes it a lot easier down the track when you do, you know if anything does pop up you've got everything, everything in the one agreement and you can refer back to it, just, yeah, allows you to do that. Yeah, perfect. So that's going to be on the legal side as well which we will touch base on a few points down but we also want to look at considerations such as asset protection, why do we want to look at asset protection in that first instance, and we can bring it back to our situation. For example, so I'll get Shaneel to explain how we to our structures and just because we do it this way doesn't mean that others should do it the same way, what you need to do is seek advice on it first.
Yeah, so currently at the moment.
All of the in for our situation basically all of the business, the businesses are in Reubens name, but all of the assets actually held in my name and that's a decision that Reuben and I made. When we were planning out all of our structuring and everything should anything happen down the track to the business or anyone you know, try, Try something get a hold of that bad situation happened and we put in a position where someone wants to take something out against the business. It means all of our assets are basically protected because everything's still sitting under, under my name rather than under revenge.
Yeah, and that's something that we do, and you have to get into discussing starting just jump into the sort of situations where you'll just implement something because someone else is doing it, we've done this for this particular reason and as Shaneel mentioned all of the trading entities, all of the entities that have risk are under my name so I'm essentially the risk taker, I'll stand in front of the train and it'll hit me before it hits, shinier or takes away our assets in the background so that's how we've set it up.
Now, the next point I want to talk about is tax minimization super super super crucial to make sure that this is taken in
consideration before you start trading, And before we start implementing structures because time and time again, we're coming across businesses who suddenly go from 100k in revenue, you know, making maybe 30k in profit to a million or $2 million in revenue making 600k profit or 500k in profit as a sole trader, without any consideration about how tax can be minimized. Now, this is probably one of the best ways to actually minimize your tax, and there are a variety of ways we do this but I get your work Chenault works in the background, and she does internal taxation planning for us as a CFO, with multiple entities that we do have, but I guess our recommendation there is to make sure that you have flexibility in that tax base any other things you want to add yeah and just making sure you watch heading to your accountants, making sure you're meeting with them regularly and assessing like e
ven if it is initially, you know, that at the very minimum once a year, making sure you are getting a good picture of where you're wanting your business to head, and what your plans are for the future because you don't want to get into a position where like Reuben said you are a sole trader and down the track, something comes along in even someone might want to purchase the business from you. You don't want to be stuck with having all of that going through into your personal name when there could be other potential options where you could minimize that tax rather than having it all sitting, sitting under you personally.
The last few points I had here were basically making sure that you're also looking at your industry and the type of business that you go into specific industries specific areas require specific structures so for example in the E commerce side. A lot of people who aren't well versed in the space will probably not know that the ideal structure for an Amazon US type of business is a company. Now why is that because the US, don't. They don't respond well to trust, and it also gives other firms sort of opportunities there
as well. So make sure that you're looking at your industry, construction industry for example here in Queensland we're making sure that a lot of the, the entities are set up in a company because of kvcc registration issues. So, it is a case by case basis and don't worry if your friends are doing something different. That's the biggest mistake that we see is that my friend or God on the street started up a trust so I should do it. So, why did I start a company in time, you don't need to listen to those sorts of aspects, listen to your advisor, they are the ones that will be able to guide you in the right way. Anything you wanted to add to that. No I don't think so.
I guess the last the last aspect of choosing the right structure is just don't rush into it. I think that's the last thing. You don't need to rush into it. Make sure you take the time spend the money, because this small investment that you need to do with a stock can save you 1000s Not only in tax minimization, but also protecting your own assets so make sure you're investing into the foundations, because as the Dow will grow and
scale. don't always just take the cheapest option from the beginning. Obviously, setting yourself up as a sole trader is obviously the lowest cost option but like Ruben said, if you set up properly from the beginning it's going to save you lots of money and time potentially later on down the track when your businesses grow. And also we've had we've had multiple clients and her crew have already started through a sole trader let's say and that may be the right structure for them but if you are worried or concerned that you're not in the right structure. When you're rushed into it or you want a second opinion just let us know.
We offer a free 30 minute meeting here so you can click, you can click on the install and it will have a link to that, you can call our office and one of our managers here accounting professionals will assist you with figuring out what you need to do.
Okay, let's move on. Sorry, then the next stage. Obviously the registrations of the business I think a lot of clients are getting conf
used is where they don't know if they need additional TFM additional ABN so what's your advice around that. Sure. Yeah, so you will always have any sort of entity that you have set up in your training through will always need to have a TF N and typically an APN. The other thing outside of this that I think people who do have anything to add to that. Well, I guess, yeah, you can. Yeah, I think the other thing, like on top of that, around registrations, would be that people are always sort of asking when, when they should be coming, becoming GST registered is a big one, because people tend to think, or they may have to get GST registered straightaway but that's actually not the case it's not until you're turning over more than 75,000 for most people that you have to become GST registered. So that's a really big one as well. Yeah, again it comes back to seeking that advice because we have had some clients again in the E commerce space where they haven't registered is the other way around, they haven't registered for GST waited until 75,000. However, all of their products, and all of their revenue was GST free, meaning that they should have registered
from the get go, and they could have saved a one in a tax basically so it's again case by case basis but registrations. It's one of those ones where. Just make sure to get your, your advisor to do it. Yeah, it's the easiest, easiest way to make sure that it's all covered because, you know, we always have clients coming to us and they're not really sure if they have an ABN set up properly for the company or they may have lost city event or something like that. If you get your accountant to do it from the get go, we'll have everything on file basically. And it just makes it easier. So moving on from registrations, let's go on to a bank account structure this is a question I get a lot, and it's not necessarily to do with tax it's mostly to do about how should we set up bank accounts, what's the ideal way so how are you doing at the moment within our businesses, yeah so how we structured at the moment is we basically have one trading account where we are paying or receiving all of our income and paying a majority of expenses out of. Then I also have a savings account or we have multiple savings account set up, but if you're just beginning. My recommendation would be to have to always just make sure you're setting up those two separate accounts one, a working account and, to a savings account. And with the savings account, you sh
ould be using that to, to put away money for things like your tax your super your PA ye withholding so what I would recommend when you do start, you know, employing staff and all of those things is, every time you're doing a pay run, you automatically straightaway transfer the pod withholding and the super way each pay run so that you know that it's sitting in that savings account, and when you get to the end of the quarter, you've got it there to be able to make payment for it, lots of businesses get stuck they think they have a wad of money, just sitting in that trading account, and they will go and spend it, not knowing that a whole lump sum of that is going to need
to go to things like your subaiya with your pod recording and your basses as well so that's a really good way to work it, yeah 100% That's one thing that I always touch base with clients on is their cash flow monitoring their cash flow and how to how to make sure that you have enough money at the end of the day to pay tax, and enough of the money in the bank to pay yourself but also grow your business and that's something that we'll do in another episode, because I think that deserves its own full hour of going into cash flow and the ways that we can sort of maximize and optimize the way that we control that. Going back to the bank accounts.
One thing that we could touch on at the moment is obviously some clients, they won't be able to identify or understand how much tax to save, that is, you know can be somewhat simpler. Pay YG obviously it's coming from the payroll, but how do we recommend clients to figure out how much tax to put away let's say each month if they are making a profit, how do I, how do we say you employ a 10% or 20% What would you recommend. Yeah well, but my recommendation is your first port of call would be to touch base with your accountant, they are able to run reports obviously and even run through an explain, give you a better understanding of what you're sort of l
ooking at when you are looking at your profit and loss, but they will be able to give you a good gauge of how much you should be putting away whether it be you're meeting with them monthly or quarterly, and down the track, you'll start learning. If you're meeting with them regularly, for he shouldn't be looking for and how much she should be putting away basically yeah I guess the importance of that is you don't want too little in those tax accounts, otherwise you won't be able to pay your tax off, and you don't want too much in those tax accounts because if you do have too much of a surplus in the head, whilst it's good that you're saving it it's money that's there, you could be using marketing and you could be using that money for additional payroll, additional stock, so it's important to try to get as accurate as possible and that's where an advisor can help you.
Okay, let's move on to. I think this is a very important one because this is something that it's not everyone's forte and then I wanted to discuss a few aspects in here about who should be doing the record keeping in the first place. What type of people are suited to that and when it's beneficial. I guess to start hiring an external bookkeeper, but let's s
tart off with invoices and receipts, what do we need to keep basically everything you need to keep everything and you need to keep it for a minimum of seven years, it is at the moment so. And that doesn't mean you necessarily have to be keeping paper copies of everything I would hope that not everyone has paper copies, sitting around for STEM initiative, because that's a lot. So there's actually heaps of different software applications that you can get down. That actually store these invoices and receipts for all of your expenses that work really well that integrate with your software as well as your accounting software. So going into that what are the what is the accounting software that we use or what do you recommend to clients to use so that keeps the office tidy allows efficiencies and allows them to scale. Yeah, so we recommend to majority of all of our clients, zero is the number one software to use zero actually allows you to connect your bank accounts to the software and you get bank feeds and everything so it makes your general bookkeeping a lot easier in terms of receipt. There's two programs that we probably offer or recommend, and that's DEXT and Hubdoc. They both integrate with zero. And, yeah, will allow you to allow your bookkeeping just to become a lot easier once you've got i
t all up and running and connected and everything. Yeah and then just an example we just set up a client recently who traditionally haven't been great with the vehicle keeping record keeping and so forth. So we implemented zero alongside text, and we set up those set up the text account on their phones, so all we said to them was that we'll handle the bookkeeping and on our end, all we need you to do is designate someone either yourself or manager or whoever it may be to make sure at the end of the day they're taking pictures of all the receipts on the next app, it's very very quick, and that'll automatically save it into the dex program, and we'll have access to that, then we can put that into the zero account so it's very very simple and it's all about setting processes and procedures from the beginning, and building a good habit. Yeah, death's door so if you're receiving all of your invoices through your email, it also allows you just to forward it straight to link to an email address, and it'll upload straight into the application which I find is really really good. Yeah, any software that saves time, improves accuracy and allows you to grow your business is software that's worthwhile and software that's worth paying for. A lot of people and that's what I wanted to touch on the next is a lot of people stay with spreadsheets and and not hire third party bookkeeper and they continue to do
it themselves and very archaic way that ends up costing them more in the long run, not only gets time, not only in in accuracy, but also when it gets your accounting, believe it or not, if you think you're saving money on, on not having an accounting software, your accountant, nine times out of 10 will charge you more because they have to do more work in the background to get these figures out today, make sure they're accurate put it into zero, or the accounting system. So if you're thinking, if you're on the fence about getting an accounting software whether you're smart if you think you're too small. I would just say jump into it, feel and see the actual. I guess benefits.
Yeah, cloud accounting software will also allow you to see your figures or current figures, all the time here using anything other than cloud accounting software it really restricts you in that sense. And as we mentioned before, if you're meeting with your accountant regularly and whatnot, you would want to have a cloud, cloud accounting software so that they can help you with basically real time figures, not just anything that's like historic that you're sort of looking back on. That's exactly right. So he defi
nitely kind of manage a business without being able to see these speakers and it's one of the biggest downfalls of businesses that we see that are struggling because they just don't have a grasp of these figures. Yeah.
Anything else want to touch base on in regards to bookkeeping or record keeping?
My only thing would be is, as Reuben sort of touched on at the beginning, making sure that you've got the right person looking after your bookkeeping. There's all different types of people out there, those too even to give you an example, me and Ruben were completely different types of people. He is very big picture. Big Ideas sort of orientated. Rather than wanting to get down into the nitty gritty and making sure that the processes and everything are in place, if we left the bookkeeping up to Ruben to do it. It would be an absolute mess so yeah, I wouldn't even want to imagine, but it would be. Yeah, and he's an accountant and so that's just Yeah, it's all dependent on the person, whereas I'm the type of person that's a lot more structured a lot things put in place I like there to be systems and, and things like that so
it's not your forte and make sure you're finding someone that is an expert in that sort of area to take care of it because it is really important. And it'll just make your life so much easier. There's no point in you sitting there spending hours and hours doing something that one you don't enjoy doing. And two, is taking you double the time, it wouldn't if you were to stop paying someone else to do it, there is the opportunity cost as well where is you
r time spent isn't sitting there for two hours, punching in numbers into Xero, or is it or is it, dealing with clients or, or creating your product and getting out there and making, you know, two $300 an hour doing what you do best, so you got to think about those things as well and I think that's where a lot of business owners get stuck as well they have that sort of small mindset, short term mindset, but you got to think of the long term game, and I think. So one other aspect that we're continuously looking at at the moment is insurance, you know, we just have started up our insurance as well. New Wave insurance, where Amanda. She's a legend, she will go out there and actually look at our clients premises and go through the business and make sure that they're covered, what are the important factors that clients need to know about new business owners. In terms of insurance. The main one probably making sure that you've got insurances in place public liability is probably the b
iggest one that you need to make sure you definitely have in place. But there's a whole, a whole minefield of different insurances basically that you can have. But your insurance broker or getting an insurance broker will help you with that. They can help from doing things, even from things like if you've got multiple vehicles within your business setting up, making sure that you've got, motor vehicle insurance or fleet insurance for all of those vehicles is something that's really key. What else are just one of that, I guess, all of these things that were mentioned in insurance, you know, choosing the right structure. These are all aspects, where I feel as though they're an investment to your business, you're building a very strong foundation and again I come back to those foundations and, and a lot of people will bypass these aspects
that so many times we've seen it time and time again sorry that they're just falling into a trap of spending more down the track, losing more down the track so insurance is one of those ones where it's a necessary evil in a sense, was meant to be paying for it. No one wants to be, insurance, no one wants to be paying for even insurance in the personal level, but if you do it right, and you're protected one you'll have peace of mind, and two, you'll be able to really have confidence that your business can grow and scale. Yeah, there's even things insurances for things like key person insurance so if you're, you know the main person running your business and your business basically would not be able to run without you. That may be something that you need to look into. Because, should anything happen obviously you need something in place to make sure that that's covered or the ability to make sure you have funds to be able to hire someone to replace you. Yeah, I'll do another episode with Amanda as well just to dive a little bit deeper into this insurance section because it can be critical, especially to niche businesses such as E-commerce businesses event their products and so forth. But if you do need to touch base with someone in regards to an MBA that you can contact her. If you go to New Wave insurance of Comden au or contact Amanda at New Wave, insurance, contact us
and we can call them call our office and we can get you in touch.
Jumping onto legals now I know you weren't chatting about shareholder agreements which is such a great point. And you there have been mistakes in the past where we've especially myself going to so many different businesses and having so many different business partners and so forth where you fall into these traps because it's at the start, you're everything's all happy and you know all these other aspects just getting left behind any important aspects that, you know 1,2,3 years down the track. If something does go wrong, or there is a split in the business or people just naturally going separate ways, you know, how do we protect this and these are where the righ
t oil will come into play. Yeah, just a little bit further detail on shareholder agreements and things that they can include in there are things like how much you know you should be getting paid as a wage basically definition on what each shareholders role is in the business. It's a really big thing. Things like if one shareholder wanted to sell out of the business down the track, what the process should be as in, whether they have to first offer it up to the other shareholder or if they can just put it out to market basically without approval from them, so they're really important things that can
have a major effect in your business if you don't have in place. That's exactly right. My great loyals sit down the business owners, and it doesn't matter if you are friends if you're you completely arm's length or if it's, if it's your brother or your sister. It's very important that everyone goes through this to understand what everyone's I guess intentions are in the business in the first place. Of course everyone wants to make a great business but you might have one person that wants to exit the business in two years, and the other person wants to hold it for life. Yeah, there are big issues with this because if you don't plan for it for at the start, then there's going to be a time where you're going to be butting heads, yeah and then the lawyers coming out and, and it just got very messy and it gets very expensive so a great lawyer can save you a lot of money on the track. Simple agreement. Yeah, yeah. In terms of those legals as well I guess the other things you need to look at are employee agreements to bring on staff, a great HR, legal specializes in the HR department I guess if you contact them, they'll be able to keep you on top of agreements and also just penalty rates and all those sort of aspects awards show you have employee, like employee contracts in place basically to cover you off on even s
imple things so that they are aware of, you know, how much notice they have to give should they decide that they want to quit things around, you know, leave sick leave all of those sorts of things are included in that. Is that the right but look again, If you do need context and we have some great lawyers in the Gold Coast up and coming lawyers and also those that have been in the game for many years, we've worked with a number of them across the Gold Coast, so if you do need help with that, let us know we can put you in touch.
So, basic compliance, obviously as encounters everyone thinks, oh, accountants, I must be lodging tax returns and and getting refunds and all these sorts of aspects. We want to touch base a little bit about what are some of the basic reports and statements that you'll have to watch to the ATO and other aspects to make sure that you're compliant year in, year in, year out basically so one of the things that you think that you would recommend clients to understand. Yeah. So at a minimum, if you're running a business typically, everyone will have a tax return that they have to launch and that will likely be if you have an entity set up you'll be having to launch attacks each time for your, your entity Plus, you'll likely be having to purchase a tax return for your self individually as well. If your business is, as we mentioned turning over that 75,000, Or you are GST registered, you then have to think about m
aking sure that you're working faxes. And that could be on a quarterly basis or a monthly basis depending on your size. Within those boxes as well if you then have employees, you should be including the wages within those facets each quarter or month as well on top of that, so they would be probably at a very, at the very minimum, your best is, and your tax returns, and as a few extra things when we come towards the end of the year, as well as you increase the complexities within your business you start getting motor vehicles he start paying all the bonuses or having entertainment and so forth little other things start to come to play, but it's always good to again to regularly touch base with your advisor to sit down with them and go Are there any other obligations that I need to know about you don't want to sit there and then after three years you figure out that you have to backdate and pay all this payroll tax or whatever it may be, but I've been another as your said, your your annual tax returns, in your activity statements throughout the year, who should be doing this. Your accountant, definitely, I would advise unless you, the best is sometimes the, you can. If you have a really good bookkeeper. That is a registered best ag
ent, they can be working those each quarter for you. But my recommendation would be to have your accountant. Be watching those for you so that they're doing a review every quarter of how you're going basically and just making sure everything's in place, everything's being done properly in your, in your accounting software as well everything's being recorded properly. It's just a good way for them to do a check for you. Yeah. And I guess the next comment is super biased because obviously I run an accounting practice board, but a great accountant is always worth its weight in gold. Generally any sort of accounting advice whether it be your tax returns your basses and so forth if you have a great accountant, that is doing that or a bookkeeper even the cost is far outweighed by the actual outcome of that tax return. So, you may be paying less in tax you may be paying less than your actual besses Each quarter because they are identifying opportunities and in ways that we can get tax back, or just being able to claim more but that's the difference between I guess lodging itself, and watching it through a trusted advisor in a payment, you may pay three 400 bucks for a bath and you think, well I can do that myself in a few hours, but you may lose five grand or a few grand in in deductions losse
s. So just think about that one as well because it's always an opportunity costs with anything in life and anything in business. Yeah, in terms of the compliance as well. One thing that I would want to t
ouch on is super your superannuation liabilities, just because it's something that the CIO is really cracking down on you need to ensure that you are making sure to pay your soup on time, and that means, in most cases it's due on the 25th at the end of each quarter. If you don't have it paid on time, you're actually meant to be preparing something that they call super guarantee charge segments where you have to pay interest on top of the super that's actually payable to the employee so it can cost you end up costing you a lot more, because why do you have to get your accountants to prepare your super guarantee charge segments which, which takes some time into you're going to have to pay interest on top of what you would have originally had to pay for your suit to your employer's is that the right, I guess.
Those are the aspects that we wanted to touch base on Is there anything else that you think are waiting to guide people on in terms of setting up their own business or if they, if they have already started what they should be doing at this point in time. I think we've pretty much covered everything. I just want the last aspect that I wanted to touch base on just with any business and we have to remember guys that businesses. They'll be, they can be one of the biggest investments that, that you do within your lifetime and especia
lly if you want to keep growing the business itself. But for me in from experience and from looking at other businesses, they are probably the, if not the best in terms of return. So it's worth putting that money here, because if you think about it, if you weren't put, let's say if you had $100,000 And you were put that in the bank, you're getting less than 2% if you're putting them into marriage funds, you'd be lucky to get anywhere between those seven to 12% if you're putting down into property, If you're hopeful that it'll grow over time but you're getting a 10% growth, you know, in great conditions whereas businesses we've seen businesses that return can be huge. They can be well well above, you know 2030 40% So, what I'm trying to say is, don't, don't run your business as if it's just a short term play, run it as if you want it to be an empire r
un it as if you're looking with the intention in the back of your mind, even though you may not have the attention of thinking, Oh, maybe I'll sell this one day and if you sell it one day you have to remember that people are looking at great businesses with great profit with great procedures and great foundations. And if you could put that all together and think about that and have that mindset from the start, you're going to do well. If you think about it as it's just gonna be a cash cow for me and every time I get $1 And I'm gonna record Don Brown don't care about tax super whatever it may be, then you're gonna have issues down the track, spend the time to understand it. But, thanks so much for joining me today Shaneel, we’ll probably get you back here one day to talk about other issues within the business area but that's all for now guys and we'll see you next time.