Starting a new business? Make sure you’re structured correctly for now and the future!
In the excitement of starting a new business things can often get setup and established in haste. This is easy to understand as the enthusiasm of getting started can make other things seem like a hassle, or something that gets in the way of taking off. However there are some key things to consider at the outset around how to structure the activity and what to be ready for.
Should you invest or trade in your own name, or operate through a structure such as a trust, partnership, or company? Whilst the answer to that particular question will depend on your own circumstances and goals, what is universal is that taking time to plan and implement properly at the start can prevent big headaches or costly adjustments in the future.
So what sort of things are you planning for and what are some of the key factors to consider when starting a new business?
Family – are they too young, or too old, to be involved? If they’re too young now, will they be soon be old enough? Do you want to pass the business on to them, or do you see it winding down naturally or being built up and sold off? Is it just immediate family, or extended family involved?
Business partners – Are you going it alone, or are you involving other people? If so, have you considered the split of the business? Have you discussed and set out the rules for remuneration, benefits like cars, entitlement to profits, valuation rules for entry of new partners, or valuation and terms of exit for an outgoing business partner? This is one area in particular where taking the time to set out the rules and formalise them at the start is a worthwhile investment.
Network – Do you have the right mentors and advisors around you? People who can respond quickly when you need to put out a fire, or simply act as a sounding board in times of uncertainty or inspiration are worth their weight in gold.
Market – are you looking at just your local market, state wide, national or international? Regardless of that, do you know how to reach them, captivate them and motivate them to spend in an efficient and effective way?
Assets – is this a capital intensive business requiring a lot of machinery and equipment, does it require warehousing, or is it ‘weightless’ and can be operated from anywhere? This can affect how many entities are in your structure.
Funding – are you prepared to face an early financial storm and have you considered all the start up costs, whether that be advice, structuring, equipment, trading stock, software, marketing? Are you willing to take on debts or run an overdraft?
Risks – a very broad area to consider, but at a high level, is this a risky enterprise and one which could bring litigation and claims against it? Insurance will always be in place, but your structure can add layers of protection too. Furthermore, do you have cover in place (financial or otherwise).
Succession – do you start with an exit plan in mind? This is the most effective way to get structuring and planning right, but may not have an answer at the beginning. Do you want to leave it to family, bring in unrelated people later on, or simply build it up sale to someone else? Having answers to these questions cannot only help plan the right setup, but also guide your strategic planning and execution along the way.
Many of these things may have a simple answer, or even no answer at the outset, but they should be considered both at the planning and implementation stage as things evolve and develop when starting a new business.
If you’d like to know the best options for your business, please contact one of our Tax Specialists, complete your details below and we’ll be in touch or give us a call on (03) 9835 8200.