5 Documents You Need to Start a Business

Starting a business is an exciting process that can lead to incredible experiences, high profits, and success. However, in order to bring your business idea to life, there are several key documents you’ll need to have ready.

When it comes to the different types of business documents you need, which ones are vital to getting your business off the ground?

Read on to learn more about which documents you need to secure and keep on record as you execute your business plan and prep your product or service for successful sales.

Common Business Structures

When starting a business in Australia, one of the most important things you will need to do is to choose a type of legal structure. Your business structure affects not only the amount of paperwork you’ll have to deal with but also your personal liability, the taxes you’ll be paying, and your compliance with national and state laws.

Here’s a quick review of the most common business structures in Australia:

1. Sole trader

This is the simplest and cheapest structure, meaning only one person owns and runs the business. If you think you can handle your operations alone, then this might be the structure for you.

However, just note that since you will have full control of your assets and business decision, you’re personally responsible for everything, including taxes, lawsuits, asset claims, and debts.

2. Company

A company business structure is a separate legal entity, unlike a sole trader or a partnership structure. Generally, starting and running a company involves more complex regulations and higher costs. A company is run by its directors and owned by its shareholders.

In this business structure, the company:

• must be registered for GST if its annual GST turnover is $75,000 or more
• must apply for a tax file number (TFN) and use it when lodging its annual tax return
• must lodge an annual company tax return
• usually pays its income tax by instalments through the pay as you go (PAYG) instalments system

As a member you’re not liable (in your capacity as a member) for the company’s debts. Your only financial obligation is to pay the company any amount unpaid on your shares if you are called on to do so. However, directors of the company may be held personally liable if found to be in breach of their legal obligations.

3. Partnership

This is a business structured owned and operated by two or more individuals. Partnerships come in three varieties:

• General partnership – All partners agree to share the assets, profits, management responsibilities, and liabilities of the business.
• Limited partnership – Each partner’s liability is limited to the amount of money they have invested in the business.
• Incorporated limited partnership – partners can have limited liabilities but there should be at least one partner with unlimited liability.

In Australia, partnership laws differ in every state and territory. For example, in Victoria, partnerships operate in compliance with the Partnership Act 1958.

4. Trust

In this arrangement, a trustee (either an individual or a company) manages all assets and runs the business for the trust members or beneficiaries. The two main types of trust are:

• Discretionary – The trustee has flexibility on the distribution of the trust’s income and capital to the beneficiaries.
• Unit trusts – The trustee does not have flexibility on the distribution as each beneficiary’s capital or income portion is generally fixed.

Each entity has their benefits and pitfalls so think carefully and get some legal advice before you proceed!