Starting my own Businesses - Should I get 2 ABN's?

Hey guys,

Well I'm in the process of starting up my own small businesses and was just hoping for a little bit of information on perhaps what I should do or need to do.

I'm not really sure how to go about doing this so I'll just put the idea to you guys.

I'm hoping to start 2 businesses, one which specializes in Home Networking and other general PC related stuff and a second one for Custom PC Cabling.

Both businesses will initially be souly operated and ran by myself with no other employees and both businesses will share the same phone number, however I will be using 2 different domains so each has it's own website.

I'm hoping to use these businesses for 2 main reasons;

- Get some extra tax back by claiming things back on the businesses.
- Earn a little extra cash on the side outside my normal full-time job.

Anyway, I've tried reading up a little on business.gov.au home page but haven't found much useful info, my questions are fairly general;

1. Should I get 2 seperate ABN's or just use 1 ABN?
2. If I only use one should I just put my own name as the business name?
3. I'm under the impression that income made with my business will just go on top of my full-time job income, and so I'll start paying 30% on all income until I reach the next bracket?

In regards to claiming expenses and other things back on the business;

4. Is there any good websites that give some details on this?
5. Is there any minimum amount of income the business needs to make?

Thanks guys, by all means if there are any useful links that may answer more of my questions please let me know, that'd be great.

Cheers.

 

Hey Sim.. Thanks for the reply mate.

Well I don't mind using my own name, it's just the websites I use will have business type names. Like just for examples sake say I call my Home Networking thing 'HNS - Home Networking Services' or whatever.

Yeah you need an ABN to get a .au domain. Could you elaborate a little as to what you mean by minimising costs? I'm under the assumption that perhaps if I class myself as a 'Sole Trader' maybe I don't have to pay certain fees or something?

Cheers mate, this was what I figured I just wanted to clarify.

Well I won't be claiming huge amounts all the time. Initially however I'd be claiming a somewhat substantial amount (About $1,500) on a Home Server to serve vital things for my businesses. (Webserver, DNS, Mail etc.)

Naturally mate, I'd just much rather know the odd thing or two before getting an accountant so I have a bit of a better understanding of things.

Would you happen to have any idea on how much an accountant would charge for this type of advice and how?

 

Ok, well I've spent some time doing a little reading and gone through the ABN application form online and pretty much only have a few questions I haven't really been able to find definitive answers for, so any opinions would be very appreciated.

I understand I should seek proper advice from an accountant and will more than likely be doing so, however I'd like to have some sort of knowledge going in there.

1. Can/Should I use 1 ABN and 1 trading name (my actual name) for my businesses? They're both going to be completely operated and funded by myself only. Or should I put 2 trading names for each one?

Basically I'm just kind of splitting up what I'm going to be doing. Selling my services on 1 website and selling some goods on another. Each site having it's own logo/name etc.

2. How does claiming back expenses work? Do you need to earn as much as you claim? I ask because I'll probably be spending $2k or so setting everything up, buying a home server etc. for the business and I'm not sure how much I would earn in the first year and would like to claim the expense of the server on the business as it would be primarily used for serving the 2 websites, DNS, Mail etc.

3. Would I need to register for GST?

I've done some reading on this and found that you must register if your business earns over $75k, I highly doubt I'd ever earn that much with my businesses. My understanding is that if I don't register it means I don't have to pay GST on my earnings, but then can't claim back GST on expenses, which is perfectly fine.

4. Would I need to apply for PAYG?

I wouldn't be employing anyone so it would just be my own earnings, and I'd be quite capable of putting aside 30% (my tax bracket) of my earnings in a savings account to pay it all in one hit at tax time. I'm just not sure how PAYG would work in my situation, would it just mean whenever I make a sum of money I would have to deposit 30% of it into some PAYG account?

That's basically it for now, my main query/concern is how to go about setting up the Trading Name. I'm thinking perhaps just leaving the Trading Name as my name would be the simplest/easiest option, I'd just like to clarify this though.

 

Thanks for the reply Sim, I've just tried doing a little more reading and what not before replying.

Well I'm not really sure.. I'd mostly be getting my clientele via my websites and business cards..

I'd probably put something like the logos for each website mentioning each website and then put my name on the business cards, I did a quick little mock up in paint to give you an idea on what I mean;

Hmm, this is something I didn't really think about.

1. Are you basically saying that if I use a trading name then I'll have to get a business account and have people make payments to that name and not my own personal account?

Hmm, definitely something I'm considering.

2. So using the Custom PC Cabling example. If I were to set up a website custompccabling.com.au and have a logo created for it and had the logo/website on my business card but used my Legal Name as my Trading Name that would be perfectly fine provided I used my Legal Name on the invoices right?

Well I doubt I'd ever want to split into separate entities because everything would be completely ran by myself. The most I'd probably do is register more/less/different business names under the 1 ABN.

3. This wouldn't be difficult would it? (Seems to me it would be as simple as logging on to the ATO website and changing your profile so to speak, and adding in the new trading names)

Have done, I already know I'm definitely entitled to an ABN as I've had one previously.

4. I had a read over it and going off the things mentioned on the page I would say it's a business not a hobby. However through other reading It came to my attention that basically if you earn less than $6000 it can be considered a hobby. Or is it if you earn less than $6000 is MUST be considered a hobby?

5. How would these be defined though? My hope was to claim a PC on the business, if I were to set the business up and wait a little while would it still be considered an initial start up cost?

Thanks, will definitely read that.

I work in I.T. and part of me doing this is to gain knowledge and experience. I aim to eventually start setting up servers for clients in SOHO environments and what not so having my own dedicated server to play around with will prove to be quite useful.

Plus this large capital expense would be one I'd have make anyway as I'm in need of a dedicated server to use as a File Server & MythTV box. At least if I buy it through the bussiness it at becomes claimable.

I use VM's for testing/learning. You can run a VM in bridged mode and turn it live (which I've done before).

Basically I'm going to be upgrading my PC in the not so distant future anyway, with this business It means I can claim back some of the costs which is better than nothing.

6. Well what exactly do they mean by 'profit' .. My business expenses will be minimal to nil as they will primarily be services, the only expenses I'll really have will be the costs on the server as well as a few other minor costs for tools/equipment. I'm fairly confident I'll always be making a profit on my business, it's just it won't be very much profit, as in I'd probably make less than $6000 a year, would this still be fine?

I don't see this happening any time soon, unfortunately.

Yeah, I've weighed it up and I'll have very minimal business expenses, so I'd be best off not registering with GST.

Well I guess if they'll let me know when I need to worry about PAYG I may as well not worry to much about it.

7. If I register a trading name does that mean I'll have to open up a business account and have people make payments to that account and use that account on all expenses?

I'm considering perhaps just using my Legal Name as my Trading Name initially and perhaps later on down the track if I choose/need to I'll add a proper trading name, this is possible and easy to do right?

Again, thanks for the reply Sim.. I'm a fair bit more in the know and confident about things now and hopefully once I've figured out whether to register a trading name or not I'll be ready to go.

EDIT;

I just came across this Business names - NSW Office of Fair Trading and it looks as if Registering a Business Name and a Trading Name are 2 different things?

 

Hmm.. Well all of this seems fairly complicated, there's so many different things that can be done etc. etc.

So to start off with for now I've basically just applied for my ABN and used my Legal Name as my Trading Name, once I've started everything up and start actually getting some clients and what not I'll seek proper advice from an accountant.

I think all that it really means for me is that I have to make sure my invoices are made out to my name rather than the business names, which shouldn't be an issue.

Thanks Sim for all the assistance.

My only real query for now is in regards to claiming back on the PC I'll be buying to use as my Webserver/DNS Server/Mail Server etc.

My original thoughts were;

1. I can claim back my tax bracket amount on the PC. (30%)
2. Because it will be 100% for the business I can claim 100% of 30% back.

Although now I'm not sure if I can claim depreciation as well, if I can ONLY claim depreciation. I'm not sure if I can only offset my expenses against my revenue/profit, etc. etc.

Would you or perhaps anyone else on this forum be able to give me some sort of idea on how claiming back this expense would work?

 

Cheers Sim, you're a champion mate.

Well I'm personally great mates with a Senior Accountant at KPMG who would most likely be able to do the Depreciation schedule for me and what not without much hassle.

1. Just wondering, by any, that can mean anything right? Even if you paid over $350 for a pen?

2. Could you replace asset with expense? Or are expenses immediately claimable?

3. How can you prove the effective life of the asset is less than 1 year?

Hmm, this kind of ties in with question 2. So 'expenses' are deducted from my Gross Personal Income, so basically offset it? (i.e. If I make $30,000 but spend $20,000 in expenses, I only pay tax on $10,000)?

4. What would Legitimate Personal Expenses be though?

I'll try reading over the Depreciation link you provided to get a better idea on how it all works, thanks.

Again, thanks for the replies Sim, big help. And my apologies for the 20 questions, it's just proving to be fairly beneficial, at least now when I finally do speak with an accountant I have a good understanding of the basics and concepts and what to ask.

 

Sk3tChY
Will you be running the cables yourself or getting someone else to run them and you do the terminating etc??
Let me know when your websites are up.
Good luck

 

Will do champ, hopefully the site will be up and running within the next month.

In the beginning I'll originally just be making the cables for PC internals and Ethernet Networks but soon after I get everything up and running I'll be getting a proper cabling license which will allow me to legally lay cable and what not. I'm not exactly sure if you need to do different courses for different types of cable, but initially I'll be doing everything that's required to do phone & ethernet cables. Possibly over time if the business takes off enough I'll look into what's needed to lay electrical cable.

Also, just a useful thing to know, make absolutely sure you get your cables professionally laid by a certified cabler. If you don't you have a whole bunch of things to worry about, including large fines.

I also heard one story about someone who didn't get their cables professionally done by a certified cabler and their house burned down in a fire, the insurance company found out and basically didn't pay him out.

 

No worries, we do that and we also have licenced inhouse cablers anyway.

In regards to insurance refusing payment, I wouldn't read too much in the rumours going around.

For an insurer to refuse payment there must be very strong grounds.
eg it'll have proof that a particular cable which was not laid by a professional installer was the cause of a fire.

Regulatory fines are 1 thing but I have yet to see an ethernet cable causing a fire....

 

Sim mate, you my friend are the man!

Wanna be my accountant?

Thanks for all the info mate it's been a huge help and I'm beginning to grasp a decent concept on a lot of it. I'll probably re-read over the reply again a little later because I may have a few other minor questions but on the whole I think I'm good to go until tax time next year, in which case I'll most definitely be seeking an accountant, especially since I've got my own property now and am receiving rent, will have my own business as well as full-time work, tax time is gonna get a fair bit more complicated.

One quick question tho;

How does this work? This is something I'm quite interested in, because here's a scenario;

For the Custom Cabling business I'll be buying large amounts of product to make the cables. For example I may buy several hundred feet of electrical wire.

1. How does claiming this work? I imagine I would claim it as an expense?

2. If It's less than $300 worth of materials would it simply be a write off? (30% claimable straight up) or if it were $300+ would it have to be depriciated? What if the effective life of the cable was only expected to be a year? (i.e. I bought a large amount expecting/hoping to sell it off within the year)

Again, thanks so much for the responses, I'm beginning to understand a lot more now. I'll hopefully get around to reading that depreciation guide over the weekend.