The career path for many tradies includes going out and starting their own business.
To begin with the business might simply be you subcontracting to builders, and over time you become more of a business in your own right.
However you choose to start, and whatever size you are, there a few things you must do when starting a trade business.
One of the first things you need to consider is your business structure.
Many tradies, especially subcontractors, choose to go with the sole trader option due to the ease of setting up and the low cost.
To get up an running as a sole trader all you really need to do is register for an ABN, register for GST if you expect revenue of more that $75k, and register a business name if you’re not going to be operating under your own name.
There are certainly some disadvantages to operating as a sole trader, but it is a very quick and easy way of getting on the tools on your own.
The next step up is to become a company. This is where you have the ‘Pty Ltd’ at the end of whichever company name you choose.
Whilst it is a little more complex and costly to setup as a company, there are some benefits in terms of asset protection and tax planning.
For more information on whether a sole trader or company structure is better for you, we strongly recommend speaking with an accountant.
Another popular option for many trade businesses is to operate via a family trust.
Family trusts may be able to provide additional asset protection and flexibility in tax planning, but again we strongly recommend speaking with an accountant.
Which licenses you might need depend on the type of work you’re doing, the size of the contracts you’re taking on and the state you are operating in.
Some trades are always required to be licensed, such as electricians and plumbers, whilst other might only be required to hold a licence if their contracts exceed a certain value.
This isn’t something we can provide a lot of help with, but we’re happy to point you in the right direction where we can.
Accounting & Bookkeeping
Once you’re up and running and bringing in some money you’ll need to consider bookkeeping and accounting.
Some tradies choose to do their own bookkeeping in the beginning, and sometimes for years afterwards. With cloud accounting software such as Xero, doing your own books is easier that ever.
That’s fine if you enjoy doing the books and have the time. Otherwise you can have a professional do your bookkeeping for you.
With your accounting, by which we mean preparing and lodging your accounts with the ATO, you can do this yourself if you’re sole trader, or you can choose to use an accountant.
If you’re a company however, you must have a registered tax accountant lodge your accounts with the ATO.
We’re not yet operating as an accounting or bookkeeping practice, so we’re unable to provide any further advice or information.
We recommend you speak with your own accountant at this stage.