Starting a side hustle? Here's some simple steps for setting up a business

Thinking about starting up a side hustle? Maybe you’re looking to make some extra money for a trip overseas or to accelerate your mortgage repayments. Perhaps you’re trialling out a new career pathway to see if it could lead to a career change or a means of self-employment. Whatever the reason, side hustles are becoming an increasingly popular venture for everyday Australians.

To help you in your endeavours, our Gold Coast legal team has put together a list of basic legal concepts to help you navigate the intricacies of starting up a business in Australia.

The difference between a business and company

It’s important to understand that a company and a business are not the same thing. A business is difficult to define, but it is a conglomeration of various assets, people, contracts, names, and rights. More simply, however, a business is any commercial activity in which you provide goods or services to earn money.

A company, on the other hand, is more like its own person. A company can run a business, just like you can; or it could buy a property or invest in stocks. A company must file its own tax return, whereas a business tax return is filed as part of its owner’s regular tax return.

It is quicker, easier and cheaper to set up and register a business than it is register a company, which is why many side hustles start up as businesses first and then transfer their business to a company later.

The difference between an ABN, ACN and TFN

ABN

ABN stands for Australian Business Number and is an eleven-digit number issued by the Australian Business Register (ABR). ABN’s are mandatory for all businesses regardless of their size or structure. An ABN identifies a business and, by searching the ABN register, helps people know if they are dealing with a registered business and the correct entity. A sole trader can have multiple business names and run multiple businesses, but they as a sole trader would generally only have one ABN.

ACN

ACN stands for Australian Company Number. It is a nine-digit number that is unique to companies. A company automatically receives an ACN when registered by the Australian Securities and Investments Commission (ASIC). A company can exist without an ABN, because a company can do things besides run a business. They would only require an ABN if they also run a business.

TFN

A TFN (or Tax File Number) is separate to ABN and ACN and is simply an identifier used by the ATO for tax purposes. A TFN is required for every individual filing tax returns annually. If you are doing business as a sole proprietor, you can use your own individual TFN, but when conducting a business as a separate entity (partnership or company) a separate TFN is needed.

Setting up a business name

A business name, put simply, it’s a name under which you conduct business. All business names must be officially registered in Australia unless you’re a sole trader trading under your own name or have an exemption. You must register a business name with the ASIC if you conduct a business under a name other than your own. It’s essential that your register your business name as soon as possible, otherwise someone else could register it before you.

To register a business name, you will need to have:

an Australian Business Number (ABN), or
be in the process of applying for one with the ABR
ensure your business name is available by using ASIC’s business name availability search

It’s important to note that can’t just call your business whatever you want. There are restricted words and expressions (including offensive words or suggested connections with Australian or foreign governments) which can only be used in business names with permission or authorisation.

Check your legal obligations

Before you launch your business, you need to make sure you understand your legal obligations to avoid any fines or penalties. If you want to know more about the legal responsibilities associated with start-up businesses, contact Avis & Funk Law. Based on the Gold Coast, our team can help you navigate the licences, registrations and insurance obligations for your new side hustle.