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5 steps to setting up in business

Sarah Stowe

You’ve done your due diligence and decided on the right franchise for you – now it’s time to take care of the important details.

Andrew Graham, national head of business advisory for RSM, highlights areas you need to consider.

1. The business structure

Before you sign the franchise agreement you need to establish the most tax-effective structure in which to acquire the business – a partnership, trust, company or hybrid structure. An experienced accountant will consider things like upfront deductibility of set-up costs, ongoing minimisation of tax liabilities and opportunities for splitting income in order to obtain the optimal tax position.

2. Business registrations

Once your business structure is in place it’s time to contact the Australian Taxation Office. You must apply for both a tax file number and an Australian Business Number (ABN) to register for the Goods & Services Tax (GST) and then confirm whether you will be paying GST on a quarterly or monthly basis.

If you will be employing staff you need to find out whether you are required to register for Payroll Tax – the limits and thresholds for this vary from state to state.

Your franchise agreement will usually include rights to use the franchise brand name and trademark but you may still need to register business trading names with the Australian Securities and Investment Commission.

3. Insurances

Insurance is a critical component in your risk management strategy. It’s vital that you discuss your needs with an advisor who is licensed to provide insurance advice, such as an insurance broker.

Your advisor will help you to meet legal requirement in terms of workers compensation and public liability insurance. Business interruption insurance can help to cover ongoing costs if something like a flood or fire should prevent your franchise from operating for a period of time.

You may also want to discuss personal income protection and, if you will be running the business yourself or playing a key role, insurance to cover costs incurred if illness or an accident keeps you from doing your job.

4. Human resources obligations

If you will have people working for you, you must have employee agreements or contracts in place which comply with National Employment Standards and relevant industry awards. Your franchisor should provide guidelines, procedures and details of your responsibilities.

5. Business processes

A cash flow budget for the first 12 months you’re in business will enable you to measure the actual return on investment and compare it with the initial estimated return.

And, while a business plan isn’t always a requirement for acquiring a franchise, setting out what you want to achieve and establishing milestones along the way could help you to achieve your business goals. Graham says that, in his experience, those with a plan outperform those that don’t.

You should also be clear about the business processes themselves – how you are going to record and monitor transactions for the purpose of reporting back to the bank or the franchisor or just as part of your good housekeeping – an overview of how your business is tracking and performing.