So you want to work for yourself? It may be that it’s time to turn a hobby into a business or make the change from being an employee to freelancer. The legal and tax preparation can be daunting, but following these simple steps will simplify things. This article will detail how to set up your business effectively from the get go and avoid any issues later.

Here are five steps to register as a self-employed business owner:

  1. Decide on a business structure

  2. Apply for an Australian Business Number (ACN) or an Australian Company Number (ACN)

  3. Register your business name

  4. Apply for any necessary licenses and permits

  5. Complete relevant tax registration

Do you have to register a business if you’re self-employed?

The answer to this question depends on how your business is structured.

The simple answer is that you don’t necessarily have to register your business, but even if you're not legally obligated, it is often a good idea.

Self-employed means different things to different people: freelancer, contractor, business owner, entrepreneur, the list goes on.

But officially—from a governmental, legal, and tax perspective—it all depends on the steps the business owner takes to organize the business.

‘Registering’ a business in Australia means having a business number which identifies your business. Most commonly for small businesses, this will be an ABN.

What is an ABN and how do I get one?

An ABN is a unique 11-digit number that makes it easier for businesses to interact with the Australian government. It is free to register and your ABN details will be stored in the Australian Business Register.

After you register for an ABN, you will be able to complete other relevant registrations, such as registering your business name or making relevant tax registrations.

You will also be able to get an AUS key in order to transact with government agencies online, be endorsed as a deductible gift recipient or an income tax-exempt charity, and claim energy grants credits.

Once you have your ABN, you’ll put it on all your invoices as confirmation of your business’ legal identity.

You apply for an ABN through the government’s Business Registration Service online, and you’ll need to have identified your business structure, have proof of identity and details of your business activities and associates ready.

It is not compulsory for businesses to register for an ABN however getting an ABN makes running your business easier, particularly if you have to register for other taxes. For example, if you need to register for goods and services tax (GST), you’ll need to apply for an ABN first.

Without an ABN, other businesses must withhold 47% from payments they make to you for tax purposes.

So let’s take a step back to address the big decision you need to make before you can apply for an ABN. What is your business structure?

Business structure types

When you want to be self-employed, the key decision you need to make before you can make anything official, is what kind of business structure you will have. How are you going to set it up?

Your business structure can determine:

  • the licenses you require

  • how much tax you pay

  • whether you’re considered an employee, or the owner of the business

  • your potential personal liability

  • how much control you have over the business

  • ongoing costs and volume of paperwork for your business

Your decision should be based on the size and type of business you envisage and how you want to run it.

It’s good to know you can change your business structure along the way if your business expands. Starting out, you might want to go for the most simple option, which is to register as a sole trader.

Sole trader

A sole trader business structure is the simplest and cheapest to set up. As a sole trader, you have full control over your assets and business decisions, and fewer financial and tax obligations than if you own a company. However, you’re also legally responsible for all financial aspects of your business. That means your personal assets – such as your house or your car – can be seized to pay off any debts if the business runs into financial trouble.

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