Tag Archives: Start up

Shareholder & Partnership agreement

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You are probably reading this guide because you are at the beginning of your business venture however it could be because a partnership or shareholding has gone wrong.  This guide is all about helping you get that first shareholder & partnership agreement right so down the track there is a clear predetermined plan of how things should happen.

A Shareholder & Partnership Agreement is a legally binding contract between the shareholders or partners of a business. A Shareholder & Partnership Agreement covers the funding, structure, management and direction of the business. It outlines the responsibilities and obligations of the business owners.

WHY should all partners be in agreement?

In the excitement of starting a new venture, it is very easy to put this important task aside. A shareholder agreement is to protect the multiple owners’ investment in the business, to establish a fair relationship between the owners and govern how the company is run.

It is best to put a shareholder and partnership agreement in place when the business is first established.  At this early stage owners should be like-minded and if this is not the case questions should be asked why you are going into business together.

WHAT is in a shareholder & partnership agreement?

The agreement should contain important, specific, and practical rules relating to the business and the relationship between the owners. 

The agreement should (but not have to) include:
  • define who are the shareholders, in what percentage ownership over what term
  • define how important decisions are to be made
  • describe how the business is going to be run
  • indicate if any intellectual property is not owned by the business
  • set out the owners’ rights and obligations including time spent on business
  • agreement on accounting processes and reporting
  • decide how profits will be divided and income paid
  • regulate the sale of shares in the business including full sale and withdrawal or addition of an owner
  • define dispute resolution procedures – if 2 owners have equal decision making decide how will you break the stalemate
  • outline any additional powers of minority shareholder/s so not always overruled on key decisions
  • define what constitutes a breach of the agreement and what action should then take place – possibilities include termination or mediation
  • include restrictions to stop shareholders from starting a new business in competition
  • identify how an owner may exit the business
  • have terms around specific circumstances like:
    • Hiring and firing of employees
    • Who can authorise payments
    • Taking on debt
    • Approving expenses

If a disagreement does occur in the life of the business and there is a clear shareholder agreement it gives a clear roadmap to move forward.

A partnership or shareholders agreement can be drawn up by a lawyer and you will find several providers offer a template-based solution that can be adapted to your specific needs via the internet for minimal cost.

HOW do you deal with conflict?

Conflict will inevitably arise with shareholders at some point in the running of a business. It does not matter how well you know your fellow owners, irrespective if they are a family, friend, or business partner it is best to have a shareholders agreement in place that you can refer to when conflict arises in your business relationship.

A lot of successful small businesses have been known to have shareholders with stormy relationships. A business relationship, whether good or bad, can have a huge impact on whether a company is going to be successful or not.

Decisions should be made through discussion, compromise and ultimately deciding what is best for the business. More progress can be made on working out how to resolve conflict rather than how to win a conflict.

Being a minority shareholder and having a shareholders’ agreement that includes the requirement for all shareholders to be unanimous ensures that you have a say in the important decisions that impact the company.  This could be decisions on:

  • Adding or removing owners
  • appointment or removal of staff
  • taking on new debt
  • changing business operations

However, if all decisions must be unanimous this could cause problems and ultimately prevent your company from carrying out its business.

In a scenario when two owners each own 50% each of the business it is important to have a dispute resolution provision included. Without an agreed procedure to resolve disputes no decisions can be made leaving the company unable to operate.

You can terminate a shareholder agreement in one of 3 ways:
  1. By mutual agreement – the original shareholder agreement should have had a provision on this
  2. Termination by a breach – unless there are clauses for mediation of a breach in the agreement can lead to termination
  3. One owner withdraws – the shareholder agreement should have a provision that maps out this scenario

To force an unhappy shareholder to stay in a business may cause more problems than having a new shareholder who is interested in the business being successful. Shareholders’ agreements will often include rules around share sales and transfers – who shares can be transferred to, on what terms and at what price.

HINTS

Decisions can be specified to be based on equity holdings or unanimous by all owners.

Discussing the worst possible scenarios at the beginning of your business journey and having a roadmap to resolve them will save a lot of headache down the track.  The more comprehensive the better.

Owners need to enter into an agreement voluntarily.

Any new shareholder must be bound by the terms of the original shareholder/partner agreement.

SUMMARY – shareholder & partnership agreement for profit

A shareholder or partner agreement is a legal document that creates a set of rules for the owners to follow when a business is first established. It helps deal with certain scenarios that may occur in the future to reduce the chance of conflict.  Those rules deal with equity, decisions, obligations and the ultimate end of the agreement.  A well legally written agreement can be produced inexpensively from templates or through a lawyer.

Contracts – written legally binding document

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In our everyday lives, we are always making contracts, whether it be for a new mobile phone plan, to have electricity connected, or arranging for a plumber to fix a broken pipe.  In this guide, we will look at what a small business needs to know about contracts and how to write or agree to one that is legally binding.

A contract is an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. Contracts are at the heart of most business dealings. The agreement may be enforced in court.

WHY should I have a written contract?

A conversation and a handshake is indeed a contract.  If a tradesperson writes a price on the back of a business card and you agree to go ahead with the work then that is a contract.  This is all fine until something goes wrong and a dispute arises.  A handshake cannot be enforced by a court.

A written contract, on the other hand, provides certainty to both parties and should set out what has been agreed. Typical items set out in a contract would include payment, timeframes and materials.

WHAT do I need to know about contracts?

A court will not enforce a non-written contract as they will be unable to prove the existence of a contract or its terms.

Depending on the type of contract being created or agreed to it may be a good idea to have a professional such as a lawyer or business advisor review or write it.

A written contract should always be used when:
  • The contract price is significant enough to affect your business if you don’t get paid.
  • Quality requirements, specifications or specific materials that have to be used.
  • Doubt that the hirer may not be able to pay you.
  • Insurance required for the type of work you are doing.
  • Key terms are used, such as a critical date for the completion of the work before payment.
  • Information must be kept confidential. See our guide on NDA’s
  • Legal obligation requires to have a written contract.

Beyond written and verbal contracts other contact types include:

Standard Form Contracts – is a pre-prepared contract that has most sections already filled out and there is minimal or no negotiation between the parties.  Includes employment contract or insurance agreement.

Period Contracts– is used for business engagements where work is performed from time to time. Popular in building industry for contractors.

HOW do I create a legally binding contract?

For a written contract to be legally binding it must contain four essential elements:
  • an offer
  • an acceptance
  • an intention to create a legal relationship
  • a consideration (usually money).
However, it may still be considered invalid if it:
  • entices someone to commit a crime, or is illegal
  • is entered into by someone that lacks capacity, such as a minor or bankrupt
  • was agreed through misleading or deceptive conduct, duress, unconscionable conduct or undue influence.

A written contract will include conditions that if not met are grounds to terminate the contract and seek compensation or damages.

When negotiating the contract terms make sure the conditions of the contract are clearly defined and agreed to by all parties.

Contracts may follow a structure that can include, but are not limited to, the following conditions:
  • details of the parties, including ABN’s, ACN’s and any sub-contracting arrangements
  • description of the goods and/or services that your business will receive or provide, including key deliverables
  • payment details and dates, including whether interest will be applied to late payments
  • duration or period
  • definitions of key terms
  • ownership of intellectual property rights.
  • treatment of confidential information
  • key dates and milestones
  • required insurance and indemnity provisions
  • exclusivity agreements and restraint of trade
  • damages or penalty provisions
  • renegotiation or renewal options
  • complaints and dispute resolution process
  • termination conditions
  • special conditions

HINTS

Even if a contract is a low value, if it is in writing it removes risk.

You should read every word, cross out blank spaces, negotiate if appropriate and keep a copy of the contract. When negotiating be clear and remain professional.

If you are having some design work done like a logo created, the copyright remains with the designer unless the contract specifies the copyright passes to you.

Small businesses are protected from unfair terms in a standard form contract where it is for the supply of goods or services, the sale or grant of an interest in land, at least one of the businesses employs fewer than 20 people, and the price of the contract is no more than $300,000 or $1 million if the contract is for more than 12 months. https://www.accc.gov.au/business/business-rights-protections/unfair-contract-terms

More details on how to prepare a contract can be found here https://www.business.gov.au/products-and-services/contracts-and-tenders/how-to-prepare-a-contract

SUMMARY – contracts must be accepted

A written contract is a legally binding document that can be used in a court of law.  It must contain an offer, an acceptance, an intention to create a legal relationship, and a consideration (usually money).  The contract will include various conditions that should clearly define the agreement between the parties so there is no confusion on what will occur. If these agreed conditions are not met it is ground for termination and possibly damages.

Register a Company

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In our guide Choosing a business structure, we listed the various choices including starting a company.  In this guide, we will look at the process to register a company which is more complicated than the other business structures.

A company is a legal entity with higher set-up and administration costs. Companies also have additional reporting requirements.
A company is run by its directors and owned by its shareholders.
While a company provides some asset protection, its directors can be legally liable for their actions and, in some cases, the debts of the company.
Companies are regulated by the Australian Securities & Investments Commission (ASIC).
Australian Tax Office

WHY set your business structure as a Company?

There is less personal liability to its owners.

A company is its own legal entity and as such can borrow money, take legal action, and be legally sued by someone else.  As a shareholder of a company whether it be 10% or 100% you are only liable for any unpaid money on your shares.  So in theory they cannot come after your house, however as a director of that company if it is found you are in breach of your legal obligations to that company you could be sued. A company is owned by its shareholders but controlled by its directors.

WHAT you need to understand to register a company

A business name is not the same as registering a company name, they indeed can be identical bar the abbreviation but don’t need to be the same.  See our separate guide on Registering a Business name. However in the case of a company you must register its name as well.  For example you may have a company name “Your Town Fruit Pty Ltd” trading with your registered business name called “Your Town Fruit Shop”.  We recommend you go through the process to determine your company name listed on the ASIC website. https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company/company-name-availability/.  A company’s name must show its legal status and include an abbreviation at the end, for example, “Your Town Fruit Pty Ltd”.  The abbreviation relates to the liability of its members.

Full WordAbbreviation
No LiabilityNL
ProprietaryPty
LimitedLtd

HOW to Register a Company?

At this point it is our strong recommendation that you get assistance from a professional. You can easily find them by Googling “registering a company”.  For a minimal fee they will do all the hard work for you based on you answering some questions and providing information. These are usually accountants or solicitors and are known as Private Service Providers.  More details can be found  https://asic.gov.au/for-business/registering-a-business-name/before-you-register-a-business-name/private-service-providers/

One thing you cannot escape as a company director (assuming you make yourself a director) is your obligations to keep details up to date, maintaining records and details on a register and paying the annual fees. Australian companies also require 1 or more directors to reside in Australia depending on the structure.

HINT

The fees to register a company can be found here. https://asic.gov.au/for-business/payments-fees-and-invoices/asic-fees/fees-for-commonly-lodged-documents/starting-a-company/

If you do not go down the Private Service Provider route be prepared to understand and decide on a constitution or replaceable rules, share structures, etc.

SUMMARY – Company means less personal liability

A company structure will reduce your risk of personal liability but is more complicated to establish and maintain.  Using a private service provider is an economical and pain-free way to do the setup.

Finding a business premises

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You are ready to make that big move and open a restaurant, or maybe the home garage is not big enough anymore, maybe you want to be considered seriously and need a professional workspace.  How do you go about finding that property? This guide will help you on that journey of finding business premises.

WHAT do we need to decide first to find new business premises?

Your journey starts by deciding on the criteria by which you will make your decision.  The better your list the better result you will get. 

You need to consider:
  1. Will you buy or lease/rent a property?
  2. Would you be prepared to share it with others?  There are options around co-location or shared offices where you can run your business from a location shared by other businesses and thus share some of the facilities like a conference room or even a receptionist.
  3. What are your needs and wants in a property? – If you are opening a restaurant you probably need to be in a popular location.  If you are opening a retail store does that need to be in a mall. Will customers find you in an industrial estate? How much room will you need? If you are establishing an office you would need around 10 square meters per person. Do you need a kitchen or 3-phase power? How much parking will you need? Can trucks access your location easily? Do you need to be close to your customers? Is there a need for public transport so your workers can get to work? Do you need to consider your future needs?
  4. Will council zoning impact your choice?  For example, some business types cannot operate in a residential area.
  5. What is your budget? Can you afford it? Also consider other outgoings like office set up, moving costs, annual rental increases.

HOW do I find the right business property?

Now the search begins in earnest! There are several ways you can find properties:

  • Find the location yourself by searching for your desired area.  A For Lease sign is a dead giveaway
  • Speak to a local real estate agents
  • Contact a commercial real estate agent
  • Find a Property Broker, they will search on your behalf
  • Use the commercial sections of property websites realestate.com.au or domain.com.au

Using your search criteria and now having a list of possible locations, it is time to visit those properties. Be patient, do your homework and be careful not to make hasty decisions.

Once you have made up your mind it’s time to negotiate the price.  Chances are you can get it for cheaper so start talking turkey. 

HINT

A good idea is to ask existing neighbors questions about the location/ intended premises.

Be sure to read our essential guide on renting an office

SUMMARY – Finding the right business premises!

Decide if you will buy or lease then come up with a  want/need criteria list. Be patient and don’t forget to negotiate on price.

Bank account for small business

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You have started your new business, you open your wallet and pull out some cash, and you wonder is that my money or some petty cash from my business?  Even if you have chosen to be a sole trader it’s a great idea to open a bank account, if you are any other business structure you must have a business bank account for tax purposes.  Once you do it opens up the ability to articulate which money belongs to you and which to the business. This guide will help you understand the benefits of having a business bank account and help you understand what you should consider in selecting an institution.

A bank is a financial institution that accepts deposits and recurring accounts from the people and creates demand deposit. Lending activities can be performed either directly or indirectly through capital markets.
Wikipedia

WHY have a separate Business Bank account?

When running a business you must keep account of business transactions and a bank account is a great way to have an auditable paper trail.

A separate business bank account will help you to:
  • Clearly show your business finances separate from your personal finances
  • Analyse your cash flow
  • Monitor your business income and expenses
  • Extract information needed to meet your tax and reporting requirements
  • Get detailed records of your business transactions. These can be downloaded to a spreadsheet or imported to an accounting package.

WHAT else can you do with a Business Bank account?

If you have a credit card attached to your business bank account and do most of your transactions through your credit card, your bank statements will, in effect, be a checklist of those expenses.

Some banks offer overdraft facilities, essentially providing a loan facility to go into a minus balance.

To open an account you will need an ABN and ID documents of an authorised owner or director of the business.

HOW to choose a business bank account?

So which bank should you choose? In fact you may not choose a bank, it may be a building society or credit union.  The answer is the one that suits you best and you should consider these points when making your decision:

  • What are the fees and charges?
  • Do they offer merchant facilities like EFTPOS?
  • Are their interest rates competitive if you need to borrow?
  • Do they cater to the needs of small businesses and do they have offers/solutions to suit?
  • Is there a local branch in case you need to visit? 
  • What is their online banking interface like and will it integrate with your accounting package?
  • What information is reported on each transaction?
  • What security measures do they offer for online transactions to protect your business?
  • How fast do they transact instructions and until what time at night?
  • Do they offer foreign transfer arrangements and what are the charges?
  • Can you have access to your own bank manager or business banking specialist?

For more information and comparing various bank accounts visit
https://www.finder.com.au/business-banking

For taxation purposes, the ATO provides the following guide on record-keeping https://www.ato.gov.au/Business/Record-keeping-for-business/Detailed-business-record-keeping-requirements/Running-your-business—records/Banking-records/

Here you will find useful information such as the requirement to keep records for 5 years including the period of review.  For example, did you know that if you did your 2015 tax return in 2016 you would need to keep your 2015 tax records until 2021.

HINTS

Regularly bank all the cash your business receives so your income and expense information is always up-to-date and you can easily reconcile your accounts and analyse your cash flow

Register for online banking – this may simplify your record keeping and bank reconciliation process as you can:
  • easily get detailed records of your business transactions
  • download financial information from your online account to your accounting package
  • identify extra transactions in your account including bank fees or interest charges, and direct debits and credits
  • check and record any errors or omissions
Regularly reconcile your bank records, which may help:
  • you be more confident that your records contain all the information you need to prepare your tax return and activity statements
  • you to better understand your cash flow
  • reduce the time it takes to prepare your activity statements or tax returns

SUMMARY – Small Business Banking

Unless you are a sole trader you must open a business bank account.  It will help you manage your finances and different providers will have an offer to suit your needs.  Always check to see what other services the bank may be able to offer your business.

A handy comparison of bank rates and fees is available here to help you compare. https://www.finder.com.au/business-banking

Business Insurance – protect your business

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In many of the guides available from this website we have been discussing liability associated with running a business.  We have used extreme examples, like losing your house, so you understand worst-case scenarios.  The good news is that we can protect ourselves against most of these liabilities and this guide will explain the key insurance types you should consider.

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as an insured or as a policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.
(source Wikipedia)

(source Wikipedia)

WHY do I need Business Insurance?

First consider your personal life.  Do you insure your car, home, health, income, or life?  Yes, most of you do protect yourself from unexpected expenses in the unlikely event something goes wrong.  A business is no different!

WHAT might we need insurance cover for?

In business the sorts of things we would consider protecting include your workers, your personal liability, company assets like buildings, company revenue, and your customer.

HOW do I know which insurance policies I will need?

Some insurance is compulsory and includes Public liability, Third-party Personal Injury (if you own a car), and Worker’s Compensation (if you have workers).

Public Liability Insurance

Public liability insurance covers you for third party injury or death. It helps protect you and your business when you are liable for negligence. This can be as simple of someone falling over in your shop but other examples include:

  • food poisoning
  • property damage, such as causing a fire
  • providing bad advice, e.g. selling a commercial fridge to a restaurant that fails to keep its temperature meaning the restaurant incurs a loss of inventory
  • nervous shock, such as emotional distress or a recognised psychiatric illness
Third-party Personal Injury insurance

You cannot register a vehicle in Australia without this insurance however please make sure you declare you will be using the vehicle for business purposes.

Workers Compensation Insurance

If someone is injured or illness occurs in a workplace you have responsibilities to cover the costs which will be incurred, you cannot just send them off to a bulk billing doctor and pretend it happened at home.  This insurance will cover worker’s compensation, first aid, and rehabilitation.  There are authorised providers of this type of insurance and a list is available from APRA https://www.apra.gov.au/register-of-general-insurance

Some quick callouts.  Sole Traders cannot cover themselves individually.  Independent contractors may require their own insurance. 

Other insurance policies you may consider include (not compulsory):

Accident and Liability Insurance

If your business is likely to be sued,  then you should consider this insurance.  For some industries this is mandatory, for others optional. Further information by industry resources can be found here https://www.business.gov.au/Planning/Industry-information

You might consider this insurance if you:

  • are a company director or senior manager
  • work in an industry that attracts large government fines
  • collect personal data of customers
  • sell, supply, deliver or in some cases service goods or services that could cause damage, injury or emotional distress
  • provide professional advice
  • sign contractual obligations that possibly could go wrong or not be met
Stock, Product and Asset Insurance

If your business would fail from loss of an asset or stock, insurance may reduce that risk and could include insuring for:

  • Building and Contents
  • Farm crops, livestock, machinery
  • Goods in transit either as delivery or perhaps you own assets being moved like a bulldozer
  • Electric or machinery breakdown and or including spoilt stock, for example food
Personal or Loss of Income Insurance

In the event of a disaster to you or your business could you or your family survive a loss of income?  These are both personal and business insurances you may want to consider:

  • Income Protection
  • Life Insurance
  • Disability insurance
  • Business interruption or loss of profits (for specific insured dangers like fire)
  • Management liability (protects personal assets)
  • Employee theft or Fraud
Technology and Cyber Crime Insurance

Criminals are more likely to break into your computer network and damage or steal from your business than break into your premises today. Every year this becomes a bigger issue and you should take steps to protect both your expensive computer hardware and the even more valuable data that supports your business.

SUMMARY – Talk to an Insurance Brocker

Knowing what insurance policies you need can be complicated and we recommend that you speak with a licensed insurance broker or advisor. We also recommend they are licensed which can be checked on the ASIC website. https://connectonline.asic.gov.au/RegistrySearch/faces/landing/ProfessionalRegisters.jspx?_adf.ctrl-state=xxgvmg709_4

Payroll – paying employees

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Within your small business, people are your most valuable resource but unless they are a family member they are unlikely going to work for free.  This means that you will need to pay them.  That sounds easy but you have to deduct income tax, pay superannuation, accrue holiday and sick leave and the list goes on. In this guide, we will look at payroll requirements, explain how you pay tax, and look at some of the solutions to make it easier.

There are 10 minimum entitlements you have to provide to all employees called The National Employment Standards (NES). The 10 minimum entitlements of the NES are:
Maximum weekly hours.
Requests for flexible working arrangements.
Parental leave and related entitlements.
Annual leave.
Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence leave.
Community service leave.
Long service leave.
Public holidays.
Notice of termination and redundancy pay.
Fair Work Information Statement.
Note there are some exceptions for casuals. More details can be found on the NES website

WHY should I care about payroll?

The payroll process is important as a small business need to do two things:
  1. Pay employees the right amount at the right time, every time. Fairwork provides a base pay calculator which can be found here. https://calculate.fairwork.gov.au/FindYourAward
  2. Withhold the appropriate amount of tax, provide that to the Australian Tax Office with the required reports, and as part of this keep accurate records.  You also need to provide the employee with a payslip and keep records for 7 years.

WHAT you need to know about Payroll and Tax

Three types of tax must be paid:
  1. PAYG withholding – Pay As You Go tax is the employer assisting the employee meet their end of year tax liability. You must register to start the process, you must ensure the worker is entitled to work in Australia and you must withhold the tax every time you issue payment to your staff. Details on how to pay this tax can be found later in this guide. More details can be found on your obligations here. https://www.ato.gov.au/business/payg-withholding/
  2. Payroll Tax – This is a state-by-state tax and is a tax on your business not the employee. It is calculated as a percentage of your total wage bill once you exceed a certain threshold. Further details can be found here. Threshold and payroll tax rates, as well as payment requirements, can be found here:
    1. ACT Revenue Office
    1. Northern Territory Revenue
    1. NSW Revenue
    1. Business Queensland payroll tax
    1. Revenue SA
    1. State Revenue Office of Tasmania
    1. State Revenue Office Victoria
    1. WA Office of State Revenue
  3. Fringe benefits Tax – FBT is a tax that employers pay when they provide certain benefits to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wage package. More details and how to pay can be found here https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/ A common example of this may be FBT payable on a company car used for work and pleasure.

A further requirement in the payroll process is the payment of Superannuation.  If you pay an employee more than $450 a month then you must contribute a further legislated amount to an employee’s chosen superannuation fund. https://www.ato.gov.au/Business/Super-for-employers/

Leave is also an entitlement that must be calculated but is not compulsory on the payslip. The types of leave include:
  • Annual Leave – workers accumulate leave from the day they start at a rate of 4 weeks for every 12 months worked. It does not apply to casuals and should be accrued in your accounts so you know that you have a debt that must be paid at some time.
  • Parental Leave – Also known as Maternity leave, it is an entitlement of leave when a child is born or adopted. To be eligible you must have worked for at least 12 months for your organisation and the leave is up to 12 months unpaid. https://www.fairwork.gov.au/leave/maternity-and-parental-leave
  • Sick and carer’s leave – Full-time and part-time employees can take paid leave to help with personal illness or injury, caring responsibilities, and family emergencies. Employees are entitled to 10 days of sick leave for every year of service. Casuals get none. https://www.fairwork.gov.au/leave/sick-and-carers-leave/paid-sick-and-carers-leave
  • Public, Religious, and cultural holiday – Employees are entitled to paid leave on Public holidays that fall on a normal working day.  Religious and cultural holidays do not have entitled leave however if you do not allow employees to celebrate these it can be discrimination.  A simple solution is to celebrate them together through work events.
  • Long service leave – Employees get long service leave after a long period of working for the same employer. Most employees’ entitlement to long service leave comes from long service leave laws in each state or territory.  https://www.fairwork.gov.au/leave/long-service-leave
    (Casuals are entitled to LSL in some states and territories)

Allowances and deductions may also form part of the payment process with additional funds provided for uniforms or travel, normally the subject of some sort of award.  https://www.fairwork.gov.au/awards-and-agreements/awards  Deductions may include a car lease payment or an extra employee-contributed super payment coming out of their scheduled pay.

HOW do you pay an employee properly?

The more employees you have, the more complex your payroll becomes. You might have a mix of employees on hourly wages and salaries. Throw in some contractors, staff on commission, overtime, expense claims, allowances, and leave entitlements, and your payroll can be different every time you run it. Your options are:

  • By hand: Either on paper or a spreadsheet. Note this may not meet tax office requirements.
  • Payroll software:  Apps can calculate pay and deductions and even fill out tax forms for you. Be sure to read our essential guide on payroll software.
  • Payroll service providers: You can outsource your payroll to experts. Some providers will do absolutely everything for you. Others will help with specific tasks.
  • Accountants and bookkeepers:  You do not have to go to a specialist payroll company. Many accountants and bookkeepers can do payroll for you.

Now that you have managed to work out how to pay your employee you also have to report and pay the Australian Tax Office.  You will have to abide by the Single Touch Payroll reporting guidelines. https://www.ato.gov.au/business/single-touch-payroll/in-detail/single-touch-payroll-employer-reporting-guidelines/  You will report to the ATO every payday how much your employees were paid, how much tax was withheld and what contributions were made to superannuation.

HINTS

Be sure to read our essential guides on Superannuation, roster management, and Payroll software.

SUMMARY – Adhere to Government Regulation around Payroll

Paying an employee is a complicated process with government regulation around conditions, awards, and taxation. It is important that you understand and follow the regulation and ensure your employees are paid the right amount on time every time.

There are lots of great tools and assistance available to help make this process easier.

Cloud based solutions

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It is in the cloud, but what is the cloud and why is it useful to me?  There is so much confusion around exactly what cloud-based solutions is so in this guide we will break it down into simple terms and help you understand what it can do for your small business.

Cloud computing is the on-demand availability of computer system resources, especially data storage and computing power, without direct active management by the user. The term is generally used to describe data centres available to many users over the Internet.
A cloud application, or cloud app, is a software program where cloud-based and local components work together. This model relies on remote servers for processing logic that is accessed through a web browser with a continual internet connection.
Wikipedia

WHY should I care there is a cloud?

The cloud has enabled computing power and applications to be accessible to small businesses that previously only large enterprises could afford to own. So what might have cost you upfront tens to hundreds of thousands of dollars before is now available for a low monthly subscription.

Not only can you get access to computing ability cheaply the other big development that has made this all so accessible is not cloud-specific, it is the improvements in the user interface.  Users no longer have to be super technical instead we have user-intuitive ways to take advantage of solutions that help us in our businesses and lives.  The best example here is thinking of using a smartphone now versus using a dumb phone more than 10 years ago.

WHAT is the cloud and a cloud application?

The cloud is a real thing and literally is a whole bunch of computers sitting in large purpose-built buildings that you can essentially hire usage.  For any computing solution to work, you need a computer that runs an operating system and then application software to run a solution.  A solution might be to share/store files, to act as a post office for email, to keep track of how much money customers have in their bank accounts, to bill customers for electricity, to manage inventory, or keep track of the finances.

Traditionally a business would own this computer know as a server and manage it in house – many still do. The cost of buying this, keeping it running, and securing it is expensive. These servers might be busy for certain times of the day and do almost doing nothing other times of the day.

What cloud computing does is enable servers to be shared amongst many users meaning that each server is better utilised thus reducing costs.  It also allows businesses to only pay for the time they use.  The internet provides a means to use this computer power sitting anywhere in the world.

A Cloud Application is the same concept but rather than just buying computer power and storage, you are renting the use of an application to do a job.  Similar to the computers, to create an application is expensive but if you can share that cost with many more users it will dramatically reduce the cost.  Thus business applications that traditionally could only be afforded by the biggest businesses are now via the internet made accessible to small businesses for low monthly fees.

HOW do I take advantage of Cloud-based solutions?

The following essential guides are available on this site for common business solutions including:

Depending on your industry there are many more cloud solutions which if used correctly could save you time and money allowing you to do more to improve your business.  An internet search will help you find them.

Other advantages that cloud computing provides other than the specific solution and cost savings include:
  • Fast integration of the solution.  No hardware setup or software loading required.
  • Access from anywhere you have internet.
  • Application software is always the latest version.
  • Backup solution normally provided.
  • Better reliability of the hardware. Cloud vendors will guarantee less downtime of solution.
  • Expandability of computing or storage as you need it
  • Enables easy collaboration with others, for example, accountant
Disadvantages can include:
  • Performance can vary by vendor
  • You have no control of technical issues (also an advantage)
  • Security of your data not being in-house (also an advantage)
  • No control of downtime
  • Relies on good internet connectivity
  • Increases your internet allowance usage
  • Support may not be to the level you need

HINTS

A consideration you should have is where is your data being stored.  Is it in Australia in the USA or maybe China?  If this is important to you, possibly from a security perspective, you should ask this question before committing.

Most cloud solutions offer a free trial period so you can test drive the solution.

Always make an extra backup copy of your cloud data in your home or office.

SUMMARY – affordable solutions to drive your business

Cloud-based solutions have allowed enterprise technology to be available to small businesses affordably.  By sharing resources to many customers, prices have fallen.  Competition has ensured vendors provide easy-to-use solutions that will benefit your business.

Internet Plan and Provision

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Just like at home you need to choose an internet provider for your business.  The exception to this is if you run your business from home and can use your existing Internet account. This guide will help you understand the lingo and suggest what to look for in an internet broadband plan.

An Internet or Broadband Plan is a service agreement you have with an internet retailer to provide you with access to the internet. The plan is normally paid by the month.

WHAT are my choices in connecting to the internet?

How can you physically connect to the internet?  Either by a fixed connection (a wire) via the NBN – National Broadband Network – sold to you via a retailer like Telstra, TPG, etc. or via a wireless solution, most likely over mobile phone networks like Optus.  For example, Optus offers mobile data (internet) to a mobile phone or by a wireless broadband modem.

Generally speaking wireless solutions are more expensive but give you more flexibility in access from anywhere there is coverage.

HOW do I choose which internet plan from retailers?

Internet retailers will offer you various connection plans and these will include the following terminology:

How to choose an Internet provider?

  1. Data usage

    This is how much data you may use in a month and is usually expressed in a measure of GB or GigaBytes.  1 GB of download would be equivalent to watching 1 movie on Netflix or about 13,000 emails. How much you need will depend on how many are using your connection and what they are sending and receiving.  The good news is most providers offer an unlimited plan.

  2. Speed

    This may be represented as NBN50 or NBN100.  This refers to how quickly you can send and receive data.  The bigger the number the faster.  Remember in your small business you may be sharing this connection with others so what might be fine at home may not be enough at work.  There is also a difference between download and upload speeds. For example, if the plan is represented as 50/20 it means you will get 50 download speed but only 20 upload speed.  The implication here is if your business sends many large files to clients that 20Mbps (million bits per second) may not be enough.  For those technically minded there are 8 bits in a byte. So to send a 1GB file on a 20Mbps link would take a minimum of almost 7 minutes. Most small offices should be considering a 100/40 plan and even a 250/100 plan if you will use a lot of cloud-based services and video conferencing.

  3. Dynamic vs static IP address

    Think of this like always putting your keys in the same spot (static) versus variable locations (dynamic). You always find your keys but if you always put them in the same spot they are easier to find. It is more cost-effective for internet providers to offer a dynamic address.  However, as a business, if you have an onsite email, web server, or are transferring files out to others a static address is better.

  4. Phone service

    Most providers will either package a phone service or have various options.  In this world of mobiles, you need to consider if that is important to you and at what sort of functionality you require like group hunting (ability to try different numbers till someone answers)

  5. 4G/5G Backup

    This is a service offered by some providers where in the unlikely event the fixed internet goes down you will still have access via the mobile phone network most likely at a slower speed.

  6. Contracts

    Some will offer no lock-in contracts others will offer contracts.  Generally if you lock into a contract you may get a better upfront deal however you cannot change easily if a better deal comes along.  Some providers will also allow you to change plans as your circumstances change.

  7. Customer service

    All is good until something goes wrong.  What hours can you get support?  Is the service prompt (some offer businesses a priority). What country will the call be answered in?

WHEN should you consider a wireless solution? 

If you run a small business out of a truck or small van this would be the obvious choice.  You could do this by either using a hotspot from your phone or have a dedicated mobile broadband device with a separate sim card.  If you run an office that has difficult access for a fixed connection or you move regularly you can also consider a wireless broadband solution. This is a modem that uses either the 4G or 5G mobile phone network but is designed to support more users and has a more cost-effective plan than wireless broadband.

HINT

How do you work out what deals are available?  The good news is there are some great websites like Finder and Whistleout that will allow you to set parameters around what you need and they will present back to you the best deals available from various internet providers. 
https://www.finder.com.au/broadband-plans/business-broadband-plans
https://www.whistleout.com.au/Broadband

There is a lot to consider, but our advice is to evaluate the impact of a slow speed connection, unreliable connection, or time to resolution and what cost/impact that will have on your small business when choosing your provider.  Ask others or check internet forums if they have had bad or good experiences with internet providers especially in the area your business is located. Experience can change by location.

If you already have an internet provider don’t hesitate to shop around for a better intern plan as many businesses are on old uncompetitive plans.

SUMMARY – Reliable Internet plan deal

Reliable internet at a speed and capacity that suits your small business is your goal.  A few minutes comparing deals may save you hundreds of dollars.

Internet Security protects from cyber threat

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What is the most valuable item in your small business?  Is it a piece of machinery or perhaps the data on your computers.  How do you protect that valuable item?  With thick steel bars or a thin sheet of glass?  This guide will discuss Internet Security protecting you from a Cyber Threat.

A Cyber Threat is the possibility of a malicious attempt to steal information, damage or disrupt a computer network or system. This threat will come via the internet , but you can protect yourself via security software and good practise.

 WHY should you care about internet security?

All the benefits of being able to connect with the world via the internet also mean that all the criminals of the world can target you. 

Not only do you want to protect your reputation and secure your private information you also must protect any customer data you have and can be fined for a breach.

WHAT are the types of cyber threats?

Malware

Refers to viruses, spyware, trojans, and worms. Malware can allow someone to take control or spy on an individual’s computer.  Key information stolen includes bank details, credit card numbers, and passwords.

Phishing (pronounced fishing)

This refers to receiving an email from someone pretending to be familiar with you.  They quite often pretend to be a well know Australian brand and encourage you to click on a link.  You will then be asked to provide information like passwords, birth dates or to pay a fake bill. For example, you receive an email from your bank but it is actually a phisher.  They ask you to confirm your banking details including password.  The phisher then uses these details to log into your real account and steal money.

Phishing may occur via email, SMS, instant messaging or social media

Ransomware

This is where your computer is essentially hijacked and you are asked to pay a ransom. Do Not Pay a ransom as they may never give you access even if you pay! It works by you clicking on a link or opening an attachment that installs software which denies you access to your computer or files.  A message is displayed indicating if you pay money they will give you access back.

How do you protect yourself against internet security threats?

To protect your small business from cyber threats you should consider implementing the following:

Antivirus software – Also known as anti-malware software, this is computer software used to detect, prevent, and remove malware.  Bought as a per year subscription you should ensure all PCs are running it and subscriptions are up to date. See Gadget Guy for reviews of the latest antivirus software solutions.

Automatically update your operating system – The likes of Microsoft and Apple are continually providing software updates to counter new threats.  Most modern operating systems are set to automatically update by default but ensure this has not been deactivated.

Automatically update your software applications – Just like your operating system, applications like Microsoft Office need regular security updates. Since the release of Microsoft Office 10, this is automatic by default (from office click file then account to check).

Regularly back up your business’ data – This is a digital copy of your data from your PCs and shared storage devices preferably kept externally to your place of business.  Back up is a critical strategy to restore your business and we cover this in a separate essential guide on Backup.

Multi-Factor Authentication – This is a security measure where two or more proof of identity must be provided to gain access. It would include some combination of password, pin, secret question, physical key (card or token), SMS, and a fingerprint.

Be cautious – If you are asked for money, your password, account details, or login details don’t provide them.

HINT

Implement a password strategy within your business which requires passwords to be strong. The key aspects of a strong password are length (the longer the better); a mix of letters (upper and lower case), numbers, and symbols, no ties to your personal information, and no dictionary words.

Make sure you have a strong password set up on your wi-fi

Decide who you will give access to what data

Teach your staff about the importance and predetermine a plan if you are affected.

Consider taking out technology and cyber crime insurance (see our essential guide on insurance)

SUMMARY – Secure your business against a cyber threat

Do not believe it will not happen to you.  TAKE PRECAUTIONS AGAINST A CYBER THREAT TO YOUR COMPUTERS.  Implement simple internet security steps to protect yourself like having virus software, keeping software up to date, ensuring you have secure passwords, and backing up your data will ensure your reputation and continuity of business.