Company Registration: Expectations vs. Reality

So, you’ve finally decided to take a leap faith, registered your business and have it up and running.

What comes next are challenges in your first 3 years that can make or break a business.

When putting your vision into action, there are several important factors to consider and tips that can make everything from registration to operation of your business much easier. However, we often have high expectations, but they are always adjusted by reality.

What is a company?

A company is a legal entity formed by a group of individuals to engage in and operate a business, commercial or industrial, enterprise.

The most common types of company in Australia are:

• 'Proprietary Limited' companies (cannot raise money from the public through share issues), and,
• 'Public' Companies (usually formed to raise or borrow public money by listing the company's shares for trading on a stock exchange).

All companies are governed by the Australian Securities and Investments Commission (ASIC), which administers the Corporations Act 2001 (Commonwealth) and other legislation. Public companies must also comply with the rules of the Australian Stock Exchange.

Advantages of a company:

• Liability for shareholders is limited. As a rule, company carries legal and commercial risk as a separate legal entity which is a separate entity to the shareholders/directors that control the company.
• It's easy to transfer ownership by selling shares to another party. Simple transfer forms can be completed to transfer the company shares to a new shareholder.
• Shareholders (often family members) can be employed by the company with flexible income tax rules on distribution of income. Enjoy the use of tax credits company pays which may be passed on to shareholders (i.e., no double taxation on company profits in the hands of shareholders in most cases).
• The company can trade anywhere in Australia. A Private company can also trade in Overseas jurisdictions. Please consult your tax professional for additional tax advice.
• Taxation rates can be more favourable than personal individual tax rates. Private companies currently enjoy a flat 27.5% tax rate where annual turnover of a company is less than $50m.
• Enjoy access to Research & Development and Export Development Grant concessions which are generally available only to PTY LTD companies (not sole traders).

Disadvantages of a company:

• A company can cost more to establish, maintain, and wind up than a sole trader business.
• The reporting requirements can be more complex; however, the general advantages of a company often outweigh the additional compliance fees associated in running a company.
• Your financial affairs of the company are governed by ASIC and information about directors and shareholders can be viewed by public.
• If directors fail to meet their legal obligations, they may be held personally liable for the company's debts including profits distributed to shareholders are taxable.
• However, tax credit that companies pay may be available to the shareholders.

What Percentage of New Businesses Fail in The First Year in Australia?

According to data published by the Bureau of Small Business Administration (SBA), small businesses have a high failure rate. About 20 percent of small business’ fail within their first year, and 60% within the third year.

So why is this the case?

There are many reasons as to why a small business can fail in their first year. These reasons can range from the external environment of your business to your internal environment.
Some of these reasons may include:

Trying to do everything themselves

One of the difficult situations for a new business owner is knowing when they need help; especially from managing the financial side of their small business to marketing. It may be a way to save costs, but by handling these aspects of the business, their focus may be pulled away from other important duties that require their attention or cause them to become burnt out. Burn outs usually occur from being completely exhausted from overworking.

There are many apps and digital connectivity designed to help small businesses and to avoid possible burn out. These digital resources can help streamline operations, support ongoing growth and customer service, and reduce time on any office and administration tasks. By utilising the variety of digital resources out there, business owners can delegate tasks to people or technology with ease and efficiency and without the likelihood of burning out.

Not properly identifying your strengths and weaknesses

Another reason small businesses fail within the first year, is due to new owners not being able to fully identify their own strengths and weaknesses. When identifying your top strengths and weaknesses, you as a business owner, have clarity over your situation. Instead of taking on everything, why not focus on your strengths and seek out resources that can look after aspects of your business that you identified as your weakness?
For example, as a small business owner, if you have little experience with budgeting and cashflow, you can hire an accountant or bookkeeper to look after the financial aspects of your business and what you are left with is extra time in the day to overlook other aspects of your business or take the time to upskill yourself on topics like bookkeeping and cashflow, so that eventually, you can handle the financial aspects as well.

Forgetting your WHY

“All organizations start with WHY, but only the great ones keep their WHY clear year after year.”

-    Simon Sinek, Start with Why

Very few people or companies can clearly articulate WHY they do WHAT they do. By WHY I mean your purpose, cause, or belief - WHY does your company exist? WHY do you get out of bed every morning? And WHY should anyone care?

People don’t buy WHAT you do, they buy WHY you do it.

Somewhere along the way business owners forget WHY they started out in the first place. Thus, why some business’ fail within the first three years. Without understanding your ‘why’ and identifying what motivates you; how you react and think in your companies challenging times can put either put you at an advantage or a disadvantage.
Tough situations/periods are part of the journey. There will be external events, outside of your business where you will have zero control over; whether laws are passed that affect the way you operate day-to-day, the economy, changes in consumer demands, or more recently the pandemic. What matters most is how you will control your reactions and your thoughts when your business is going through challenging times. Focusing on your ‘WHY’ can become a powerful tool that will help you in your journey and can be advantageous in the long term.

Expectations vs Reality

As a business owner, running a small business is both exciting and rewarding. But challenging.

There are many specific components to consider, including but not limited to: your companies business plan, financial aspects, legal matters, and overall marketing. A lot of this takes time to help your small business thrive within its market.

Many people start a business and go onto run that business having high expectations, within its first three years. However, when those expectations are not met, many are business owners are surprised leading some of them to become discouraged, while others look to their planning.

There are plenty of determined small business owners and entrepreneurs who have shared many expectations of what it takes to succeed with a new business. Without first researching the myths and facts and informing themselves of these, small business owners develop high expectations, when they start out or when they have been operating for a while. 

There are several common assumptions most small business owners have when starting their businesses:

A “way” of getting rich quick 

You ever heard of “Get Rich Quick” schemes? Many people who start their businesses assume that they can get rich quickly. In reality, typical start-ups will most likely start becoming profitable within its third year.

It takes time for companies that develop products to make profit, compared to companies that are home-based online businesses. As it costs more to manufacture, sell, and transport those products. Companies making new products take more time to become profitable than home-based online businesses. This is because it costs more to manufacture, transport, and sell these products.

Burn out vs. Delegation

As mentioned, above; on why 20% of new businesses fail; one of those reason were small business owners and entrepreneurs trying to do everything themselves to save money. But as we discussed above, this can be counterproductive and burn you out.

As a new business it is always crucial to watch your spending, and that it is always best to delegate to people or programs. Once you have the budget to expand your team, do so. You can hire people directly or hire contractors to help with the day-to-day tasks of your business.

The quickest way for a business to grow is to learn to understand your strengths and weaknesses and then appropriately delegate.

Work-life balance: Start-ups vs traditional 9-5 employment

The concept or idea of Work-life balance is different to everybody. Everybody has their perceptions of what a work-life balance is.  It is often assumed by people that business owners have plenty of free time to relax and pursue hobbies. These assumptions are rarely true, especially for a new small business.

This type of freedom mentioned above only occurs when business owners build a successful and sustainable business or if you are an expert level multitasking individual, who can handle everything thrown at you. But nobody has such skill in multitasking, and it can be challenging to build a successful and sustainable business, with long hours. A work-life balance can be different for employees and business owners.

A business owner can expect to work most days of their week on making their start-up thrive within its beginning stages. But its not always work, work, work; finding a balance is crucial as you are your most crucial investment. Remember; your business reflects your health. If you’re not healthy, neither is your business.
Find ways to manage your time efficiently and experiment with improving productivity. There are plenty of tools out there that can set your schedule and reminders and plan your day.

Branding vs. Viral Video Campaigns

Marketing is an effective way of engaging with customers and helps to build and maintain your company's reputation. Many inexperienced small business owners think that a simple viral video or placing bids for ads on Google can help them reach profitability quickly. But without a proper foundation, such as a compelling website, for your brand, you are simply throwing away money that could be used to reinvest into building a better foundation, such as a better performing website.

Small business owners can waste billions of dollars advertising on social media by believing that “They don’t Need to Worry about Marketing Straight Away”. Viral videos can create traffic to your business but will not increase sales or create a customer base with a vested interest in your business. Typically, viral videos are high cost and do not equal more customers.
Instead, what a business owner needs to do is, invest in strong branding. Branding can make or break your business. Strong branding will build brand awareness and increase brand equity, whereas weak branding will make your company forgettable.

Business owners, including entrepreneurs, from time to time assume that a brand entity and overall brand for their business will develop over time, even if they do nothing to actively shape the identity of the business. Without these steps, your business’ identity is underdeveloped and underwhelming. And that will in the long term hurt your business.
Word of mouth marketing is fantastic – but every fire needs a spark to get it started. That means that you need to figure out how you’re going to encourage people to start talking about your business, products, and services from day one.

Apple, for example, never leave these critical branding elements to chance. Which is one of the key reasons that have made them the most successful brands, because they carefully craft their brand identity to support their brands. Apple enthusiasts didn’t know they needed the iPhone until Steve Jobs introduced them to it. When Jobs designed the iPhone, he didn’t know that people wanted a smartphone, but he did know that his customers were looking for more functionality from their phones. This in turn has given them a massive customer base and loyalty to the brand.

Every business whether, new or established needs a marketing strategy.

Instant success vs. continuous market experimentation

Many business owners see that their products or services are great and unique to the market and assume that people will want them immediately. However, this rarely happens in the market, and you cannot convince the market to love your products or services. What's profitable now, won't necessarily be profitable next year or 10 years from now. So, don't let yourself fall into the "this is the way I've always done things" rut. Keep your eyes and ears open for new things. Are there newer or better ways to market your products and services? Are customers asking for something you're not offering? Is there a different type of customer you should be targeting? Get answers by reading everything you can about your industry and listening to your customers.

You, as a business owner must ensure that your products and services are not only high-quality but are also marketed to the right target audience. A great business owner thinks carefully about who their target market is, and what kind of problems they face. That’s the only way you can make sure you’re creating something that will speak to the right people. These are the first steps to building a successful business.

In the lifetime of your business, it is also crucial and advantageous if you also adjusted along the way and explored experimenting with your products and services and its quality in order to find a strong product-market or service-market that it can fit into.

It is always best to start by asking yourself these questions:

• How can I make my products or services relatable to my audience?
• How can my products or services help people’s lives?
• What useful trends can I utilize for my business?
• What are people looking for these days? How can my business address or close this gap?
• What kind of people is my target audience? Are they younger or older? Where do they live?

As you introduce your product to the market, make sure that you listen to the feedback your customers give you and pivot accordingly too. Your audience will let you know what you need to do to be successful. Just listen.

By investing in time in studying your target audience, you can understand them as individuals better. You don’t want to be just another ordinary business selling similar products or services without any difference. Which is why you should strive to build a brand people love.

So… Ready to take that plunge and begin registering your company?

What are the requirements for company registration in Australia?

Company registration in Australia involves setting up a company as its own legal entity, which lets you conduct business throughout Australia.

You can also make use of other privileges, such as corporate tax rates or limited liability.

Step 1: Fill in a company registration form at Company123.
Step 2: Once registered, receive all company documents within minutes, sign, and file.
Step 3: Receive your companies ABN, TFN and GST registration (if necessary) and begin operations.

Who can register an Australian company? 

Anyone can, however you must have at least one director that resides in Australia and a physical Australian address for the registered office of the company. If none of the directors are eligible to work in Australia, you will be able to register a company but you may not be able to trade.

In terms of providing Australian directorships, Company123 cannot provide a registered office service or resident director service to international applicants. To find some providers do a search for 'resident director service Australia'.

How can Company123 register my company for me?

We are an ASIC registered agent, agent no. 34511.

ASIC registered agents can lodge documents including company registrations on behalf of third parties.

We are also an ASIC accredited software provider. This means we have our own direct electronic link to ASIC, allowing us to lodge your registration at any time of day, any day of the week.

To get started with your company registration, fill in our online form.

For some more information on the registration process see the ASIC website.

If in doubt we recommend that you discuss your needs with an accountant or solicitor for professional advice. Company123 provides free consultations if needed and over the phone advice within business hours of 9-6pm at 03 9832 0660.

What costs are involved in the registration of a company? 

The total fee is $560.40 which includes all government fees, our service fee and GST. The ASIC registration fee is $512 and our service fee, inclusive of GST, is just $48.40.

For $48.40 you get the convenience of being able to lodge your company 24/7 from the comfort of your own home/office, and having all your company documentation such as consents, share registry, opening minutes etc automatically prepared for you.

ASIC also charge an annual fee on the anniversary date of registration, i.e., if you registered a company today the annual fee would be payable in one year’s time. Annual fees vary depending on the type of company, they can be viewed on our ASIC fee page.

The oncoming changes

Here at company 123, not only do we register your company for you, but we also offer ongoing support. Heraclitus, a Greek philosopher, is quoted as saying "change is the only constant in life.". Not only is change always happening, but it is also unavoidable. Being afraid of change is expected. Especially when change comes unexpectedly, and everything you are used to becomes different. This is no different to your business.

Changed your address? Is there a change in directors or shareholders? We can help you with the changes in your company and can finalise these changes via ASIC, so you don’t have to!