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NEW BUSINESS •  4 FEBRUARY 2025 • 4 MIN READ

Starting a company in Australia? Avoid these costly mistakes (and how an accountant can save you time and money)

A shoe stepping on a banana peel to represent a mistake that could be costly

Starting your own company is thrilling, but don't let the excitement overshadow the importance of getting the basics right. Even small errors can have big consequences down the road. 

In this blog, we’re going to talk about the common mistakes to avoid when starting a company in Australia, and how an accountant can save you time and money.

What’s a company?

In Australia, a proprietary limited company (Pty Ltd)  is one of the most common business structures - it separates from its shareholders, owners, and directors. This means a company has its own rights and responsibilities, and the shareholders are not personally responsible for the company’s debts and liabilities beyond their investment in the company. 

Pty Ltd companies can offer tax advantages, increased credibility, and easier access to funding, making them a popular choice for businesses of all sizes. However, they also involve more administrative work and compliance requirements compared to other structures like sole traders. If you’re interested in this topic, we have a more in-depth blog on advantages and disadvantages of limited liability companies.

Common mistakes to avoid when starting a company

Let’s make sure you start your company on the right foot - from getting the right share structure, knowing all your tax obligations, to getting professional help.

Mistake #1: Messing up your company ownership

Imagine your company is a pie. Share structure is how you slice that pie and decide who gets which pieces. It might seem easy. But how you divide those slices can have a huge impact on your business now and in the future - such as how much control do you have? How profits are shared? How easy is it to get investment in the future?

Many new business owners make mistakes with their share structure. They’re not clear about different types of shares, who has voting rights, and how dividends are paid out. Talk to an accountant, ask them to create a share structure that works for you so you can avoid problems down the road.

Mistake #2: Not knowing your taxes

When starting your company, tax can be complicated. Failing to understand what taxes you need to pay and when you pay may lead to missed deadlines, penalties and unnecessary stress.

In Australia, the common company taxes are GST, income tax, PAYG withholding and fringe benefits tax (FBT). There are also state based taxes such as payroll tax that may apply.  If you’re unsure about what they are, always consult with an accountant to ensure you're meeting all your obligations. Also, mark key tax deadlines in your calendar and set reminders to avoid missing crucial filing dates.

Mistake #3: No trading doesn’t mean no to-dos

It’s easy to assume a newly formed, non-trading company doesn’t need to file anything. Yes, it’s true that you don’t need to file your income tax yet, but you still need to keep the ATO in the loop about your non-trading status. ASIC also requires an annual review (and fee) from all companies, regardless of whether they're actively trading. Your accountant can help you with completing a Return Not Necessary with the ATO to avoid penalties and potential removal from the register.

Mistake #4: Being a bookkeeping disaster

One of the common mistakes when starting a company is not having your finances in good order. For example, you may be mixing your personal and business finances, losing track of receipts, and relying on spreadsheets.

Accurate and organised books are the backbone of a successful business. This isn't just about staying compliant with the ATO; it's about having a clear picture of your company's financial health. Without proper bookkeeping, you're essentially flying blind, unable to track profitability, identify areas for improvement, or make informed decisions about the future.  

An accountant can help you establish efficient bookkeeping systems and ensure you’re meeting the legal requirements.

Mistake #5: Winging it without a budget

Running a company without a budget is like setting sail without a map or a destination in mind. You might enjoy your ride for a while, but you’ll get lost in the end. A budget is basically a forecast of how your business is expected to perform financially. It helps you secure funding, make smart spending choices, and track your progress along the way. Without one, you're relying on guesswork and hoping for the best.

Luckily, accountants are pros at creating realistic financial forecasts, tracking those all-important numbers, and helping you make data-driven decisions.

Mistake #6: Going it alone 

It's tempting to think you can handle all your accounting and tax yourself, especially when you're starting out and every penny counts. You might be confident with numbers or have some basic bookkeeping knowledge. But beware – this seemingly cost-saving approach can quickly turn into a costly mistake. 

Without an accountant, you may find yourself overwhelmed by constantly changing tax rules, regulations, and deadlines. This can lead to filing tax returns incorrectly, miscalculating taxes, missing out on valuable reliefs, allowances, and deductions, and wasting hours trying to figure out unfamiliar accounting software. An accountant is your strategic partner, they’re more than a number cruncher. We have a blog on finding the right accountant for your small business.

Don't fly solo, Beany is here to help

While setting up a company alone is possible, an accountant is your co-pilot for a smoother journey. Their expertise can save you time, money, and headaches, letting you focus on what you do best, building your business. Book a call with one of our team members for a chat on how we can help with your accounting and tax.

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