Here is a random list of advice for one of my friends who is looking for a house.
If you can find yourself a house that includes white goods, you will save yourself a lot of bother moving them. In Hobart you won’t find a house without a stove, and the majority will have a fridge and washing machine. You may get a dryer or dishwasher if you’re lucky. Somebody else also takes care of repairs and collects the depreciation on the assets, which is nice too.
If you’re a couple, and you can afford a two-bedroom place (even if the second bedroom is tiny), go for it. Having places where you can be separate from each other (one of you in the spare room, one of you in the living room) will preserve your sanity.
Make sure you get a place that gets some sunlight in winter. It will vastly reduce your heating bill, and keep you sane if you’re at home during the day. Hobart-specific advice: be careful with being on the southern side of the hills in South Hobart and Lenah Valley.
Places with built-in heating will save you money. A reverse-cycle air conditioner (heat pump) runs at a lower price per joule of electricity than a plug-in electric heater, and is more efficient to boot. You’re unlikely to get gas heating or a wood fire (which is expensive but very very pleasant) unless you’re looking at more expensive places.
Be realistic about your travel and commute. Carefully consider whether you will save money by living within walking distance of work (expensive house, cheap transportation) or by living further out (cheap house, expensive transportation). Keep in mind it’s hard to change habits – if you already drive everywhere, you’ll keep on driving everywhere unless you make conscious changes.
Make a list of things you absolutely won’t put up with before going to look at places, and dismiss them immediately if they don’t meet with your requirements. It’s better to miss out on a place than to be stuck somewhere you can’t stand.
You will also have a list of nice-to-haves (for me: fan-forced oven, view of the river). These are not the same as your deal-breakers.
Also set a hard limit (or hard limits) on the amount you can afford before you start looking. When I last moved, I set a limit of $125/week for a room with a car or bus commute to the city, a limit of $150/week for a room with a cycle or walk commute to the city, and $200/week if I could rent two bedrooms, one to use as an office (and thus no need to commute). Bonus points if you create a full budget beforehand and can be confident in your numbers.
Real estate rental agents will almost always be ‘meh’ to deal with. They will (generally) be unresponsive and unhelpful. Private landlords will either be great, or even worse.
I’ve been the director/manager/shareholder (pretty much everything) of a small company in Australia called The Foo Project Pty Ltd for around two years now. We develop software, but this post isn’t about that. Today I want to talk about the ‘boring’ stuff (though I find it fascinating): accounting, legal issues, dealing with the federal government, etc.
Please note I’m not a lawyer or an accountant. If you need one, you should get one, not read blog posts by some guy on the Internet (that’s called procrastinating and it probably won’t help you). Handy hint: if you’re reading this for advice rather than entertainment value, you probably want an accountant or a lawyer.
So the things I’m going to cover are: why you might want a company instead of being a sole trader, how to get set up, what documents and so on you’ll need to keep, and some handy things I’ve learned along the way.
Why might a company structure be helpful?
The benefits and drawbacks of a company structure become more obvious once you consider what exactly a company is and what a sole trader isn’t.
A sole trader runs a business ‘as themselves’, that is, the business is the same legal entity as the person running it. Any income the business makes is personal income for the person running it, the same with expenses. A child running a lemonade stand in their front garden is a sole trader: any profit they make is theirs personally, and that’s as complex as it gets (well, technically they need to register for an ABN, but what the government doesn’t know won’t hurt them). Another thing to note is that any debts the business have belong to the person running it, so the business going bust is the same as the person going bust.
A company, on the other hand, is a different legal entity. Any income the company makes belongs to the company, not to the person (or people) who own the company. Any debts the company has belong to the company itself (though it is common for a company director to personally guarantee some large loans for small businesses). The profits flow to the owners (called shareholders) through dividends. Being different legal entities, if one of the shareholders (to whom the profits eventually flow anyway) takes cash out of the company without the company itself authorising it, then this is fraud.
There is also another structure for businesses known as the partnership. It combines all the worst parts of being a sole trader with the worst parts of a company structure. Just avoid it.
The benefits of being a sole trader:
Account keeping is greatly simplified (add up all your invoices from the year, subtract all the bills, that is your profit and put that on your tax return).
Tax is much simpler and you’ll probably pay less of it.
The benefits of having a company:
Limited liability. As a shareholder, you cannot be liable for debts the company incurs unless you have promised the company money you haven’t given it yet. Note that directors can be personally liable if they do something really stupid (best consult a lawyer for what ‘really stupid’ entails, it’s a bit complex).
If the business will ever be sold, it’s much simpler to hand over the keys to a separate entity than try and separate the business assets from your personal assets like a sole trader would do.
A company structure provides a nice wrapper for owning intellectual property (and other property I guess, but I use mine for intellectual property).
How to get set up:
This is actually much easier than you think. The hardest part will be opening a bank account!
Figure out how many shareholders (owners) and directors (top-tier management) the company will have, and who they will be. If anybody else will be shareholding or directing with you, remember the following:
It’s easier to introduce more directors and shareholders later on than it is to remove them. Pick carefully.
Being a director does involve legally mandated responsibilities, so make sure directors will be up to the job required.
Go to Register A Company (or a similar company registration service, they are all over Google) and fill out the form. It’s well explained and pretty simple. Note that they will ask you for an account password, choose something unique and never used before, as they will email it to you in plain text (*sobs*).
After the form is processed, which will only take a few minutes, you’ll be sent emails with a whole heap of PDFs. Print out all these PDFs and stick them in a binder. These are the company’s registers of members and officers, and it’s a legal requirement to have a paper copy of them at the company’s registered address.
Go to the Australian Business Register to register for an ABN and a TFN. This will allow you to do fun things like send tax invoices and register Australian domain names, and other less fun things like paying company income tax. The process is pretty simple, but unfortunately (in my experience, anyway) it takes several weeks for them to get the details posted back to you. If you might be employing people make sure to register for PAYG withholding. If you think turnover will be more than $75,000 in the first year register for GST, otherwise avoid it as it makes accounting much more annoying (you can register later if needed).
You now have a company, but there are a few more things to do to make things run smoothly and safely.
Open a bank account for the company. You can do it online, but you’ll probably need to take documents into the bank anyway, so it’s easiest to just go and talk to somebody. Take in the binder of company documents, you’ll need to prove the company exists (using the ACN) and that you are a director.
Set up your accounting program. I use Xero, which is cloud-based, very popular, and highly recommended. I did the setup myself, but I would recommend finding a good accountant and getting their help.
Buying insurance is highly recommended. I have worker’s compensation insurance (which you’ll need if you’re employing people) and professional indemnity insurance (which you’ll need if you give advice to people). Any business with actual premises will need public liability insurance and contents insurance. Insurance is like leftovers from a tasty meal, better to have too much than too little. Make sure you have enough.
Keeping documents:
There are two broad categories of things to keep: legal documents and accounting documents.
Pretty much everything you will need from a legal perspective is in the binder you printed out when you registered the company. In paper form, at least.
From an accounting perspective, keep everything in Xero (or other accounting software). Every invoice, every receipt, every transfer, every everything; it should all be recorded. Your accountant can help you (though it’s pretty easy to do yourself).
I’ve formed the practice, and I think it’s a very good practice, of scanning every single document that comes my way and backing it up to the cloud (encrypted, of course). I’ll probably never need it, but damn it will be handy if I do.
Some handy hints I’ve learned the hard way:
Never get behind in the accounting, it’ll just take even longer to catch up as things aren’t in memory any more. I sit down every night during the week and quickly scan in receipts and update any draft invoices (takes me about five minutes, sometimes less) and then on Friday night or over the weekend I sit down and do bank reconciliations, send invoices, deal with any paperwork, and so on (takes me about 15 minutes max, usually less).
Find a good accountant. They will save you money. The same goes for lawyers.
If you’re doing consulting work, get a lawyer to draw up a template for a contract. Contracts are good, again they will save you money. If you’re too cheap for a lawyer get a template off the Internet (though using a lawyer is better).
Every time you change address, or add or remove a shareholder or director (or some other scenarios), you’ll need to fill out Form 484 (“Change to company details”). Do this on time, the fees for submitting it late are horrendous.
Well, that’s all my advise. Hopefully it’s helpful. And again, I recommend finding a good accountant and a good lawyer. They will help you.
