1. Seek professional advice
Before you do anything, talk to a professional advisor such as an accountant or a lawyer to set up the right structure for your business. Know the tax implications of each option and consider the legal liabilities. Research the laws that apply to your industry.
"Many people operate as a sole trader, without knowing that they could lose their house if they are sued or something goes wrong," Kip says. "Forming a family partnership is good for transferring income between family members. However, the most popular structure for someone working on the side is to set up a company which ensures limited liability. It's then the company that is conducting the business and your personal assets are protected. With a company you may also enjoy a lower tax rate and be able to access government grants and tax incentives."
Then there is:
- registration of a business name
- considering a trademark to protect a business name
- applying for an Australian Business Number (ABN)
- considering whether to register for Goods and Services Tax (GST)
- applying for relevant licences and permits
- registering a website domain name
- drafting a business plan and developing a marketing plan
- subscribing to accounting software
Fortunately, government websites now provide checklists, guidance and online portals.
2. Check your existing employment contract
Your employment contract may prohibit outside work or restrict it in some way. Know what yours states and, if there is any leeway, seek permission from your manager. At the very least, let them know what you are doing.
"Most employers will be amenable if you are upfront and conduct your side business outside hours or on weekends," Kip says. "It's when you are using their tools and time that you will run into problems. Keep the two businesses completely separate and ensure there are no grey areas.
"This applies expecially to intellectual property (IP). If you are coming up with ideas for your side business while you are at work, who owns that IP? The company you have set up or your employer? Some employers will have clauses regarding IP rights and you need to know what they are. Otherwise, you open yourself up to future litigation."
3. Cashflow and insurance
Cash flow is imperative for any side business. Prepare a realistic budget and business plan, and ensure you have sufficient cash to cover unexpected bills, invoices and also Pay as You Go (PAYG) instalments.
"You can set up a business selling goods on the internet for as little as $100 these days and all you need is a computer or laptop," Kip says. "But if you are setting up a consultancy, that can be expensive in terms of insurance."
4. Employees
Taking on employees adds an extra level of complexity and red tape. A government checklist can be found here.
