Photo by Dean Mitchell from Getty Images Signature
How your accountant and lawyer can help you start a new business
Updated: 19 July 2022
Starting a new business brings with it a series of critical decisions and important actions. You may decide to do everything yourself but consider if this is very wise.
Until you have revenue coming in, you may find it difficult to justify spending too much money. While as a founder this is a good strategy, there are exceptions such as legal or financial guidance. It is imperative all new businesses get excellent advice in both these spaces. Good legal and financial advice when starting a new business will help you set it up correctly and is good for future proofing healthy founders.
Why ask for professional support?
When you are new to starting a business, you are probably not familiar with the legal and financial requirements. Although you can try to learn it all yourself, you are already busy, so you can risk missing something important.
Not only is it smart, it is a good investment getting advice from the professionals. If you do not have a lot of spare cash, ask a lawyer and accountant for guidance and action their advice yourself.
Do you need help starting a small business?
Here are some tips on starting a small business
There is so much to do when starting a business. Building good relationships with a lawyer and an accountant right from the start will set you up for success.
So what is needed when starting a business?
Building the right framework from the beginning will have a huge impact on how the business runs, works and is governed. The commercial platform you build now is the foundation of the business you build.
Your business structure
An accountant or a lawyer can help you set up your business structure. It is important to set up the structure of your business before you start entering into business contracts.
The following are the four business structures you can choose from in Australia:
- Sole trader
You can read more about business structures in our article here.
Surviving the first six months
Both a lawyer and accountant can help you to prioritise how to set up your business administration during the first 3 to 6 months. This is a time when it is most intense. The following is the sort of things you may need to do:
- Registrations and business licences
- Purchasing business supplies
- Entering into vendor and supplier contracts
- Internal agreements like founders and shareholder agreements
- Hiring staff, issuing worker’s contracts, pay slips and record keeping
- Registering for GST and PAYG
- Lodging business activity statements
- Setting up and maintaining a bookkeeping system
- Leasing a business premises.
Before you enter contracts
If your accountant has set up your business structure and it involves a trust, or you are unsure what the setup is, you ask your accountant which structure to use before you enter a contract.
Using the right structure is important for tax planning. For example, it may make more sense to change from being a sole trader to a company.
Shareholder agreements usually have financial covenants about the state of the company’s finances, and an accountant can help you check company financials to confirm they are correct. Keep in mind that shareholders can ask to inspect your company’s books.
Following are examples of financial covenants in shareholder agreements:
- The books and accounts of the Company truly and fairly reflect the Company’s transactions, finances, assets and liabilities.
- The Company has lodged or filed all tax and duty returns for all taxes including goods and services tax, income tax, sales tax, fringe benefits tax, payroll tax, group tax and WorkCover levies, where applicable, and has paid all amounts owing as they fall due and has paid all employees superannuation entitlements to the appropriate trustee where applicable.
- No claim has or will be made against the Company for payment of taxes under the Income Tax Assessment Act 1936 for any tax.
- The Company has met all deadlines for repayment of its debts.
- No petitions, notices or proceedings have come to the Company’s notice, which could result in it being wound up. No orders or resolutions have been made or passed to place the Company in liquidation or provisional liquidation.
Preparing and keeping company records
When you first set up your company, you are going to need to set up company records that either an accountant or lawyer can prepare or help you with. The following are some examples:
- Officeholder register which is a list of the directors and secretaries
- Director consents
- Share applications
- Share certificates
- Register of shareholders (aka members)
- Financial statements
- General ledgers and journals
- Bank statements and loan documents
- Deeds e.g. for trusts.
Ask your accountant and lawyer for guidance with:
- Setting up your business structure
- Prioritising the administrative tasks you need within the first six months
- Shareholder agreements
- Keeping company records.
Do you have any questions about setting up your business?
A good business lawyer can give you some guidance about how your accountant can help you.
I wish you success in your ventures!