Home-based businesses are becoming very popular in Australia and all around the world. According to a recent study by the Australian Taxation Office, nearly one million Australians own home-based businesses and the number is growing fast. But why is working from home gaining such popularity among entrepreneurs?
“Primarily due to the low initial investment and overhead costs”, says Adam Schuler, a business registration expert that focuses on small online businesses. “The economic circumstances and the advantages that the internet offers entrepreneurs and beginners alike make it easier for them to exploit their passion and knowledge and establish an office from home. Besides, the possibility of becoming their own boss is something that is just too appealing for some”, adds Schuler.
Home-based businesses that have made it BIG
Moreover, there are many success stories of famous and beloved businesses that have started in a garage, a backyard or even a bedroom. Among these success stories we can include Ford Motor Company, Apple, Hershey’s, Disney, Amazon, Hewlett Packard and Freelancer.com.
But working from home doesn’t equate with light work. Just as there are many successful home-based startup stories, there are also various factors that must be considered before starting a home-based business in Australia. This article will try to cover the basic information that a small business entrepreneur must examine before creating the next big startup in the business world, all in the comfort of his/her house.
Pros and Cons of starting a home-based business
Like other small business types, home-based businesses have pros and cons attached to them. Some of the main pros and cons of starting a home-based business are discussed here:
• Startup cost of a home-based business is lower.
• Saving on operating expenses like rent and utilities.
• You can create your own work environment.
• You will be able to balance your personal and professional life by saving a lot of time otherwise spent travelling or in meetings.
• More control over scheduling business meetings and other related activities.
• Exiting a home based business is easy.
• Saving on personal expenses like clothing and meals.
• Flexibility in work and allows you to take care of your family at home especially small children.
• Clients may not find your home office professional.
• You may find it difficult to stay focused and not think about home related issues.
• You may receive unwanted distractions that may waste time.
• You have to learn to LEAD yourself.
• You will be on your own and will have to stay self-motivated.
• No room for expansion when your business will need some more space.
• Working for yourself means time management, but it also means sacrifice, so weekends or time off is entirely up to you.
What licenses and permits do you need for your home-based business?
The first thing to consider is that your small business does not break any laws and that complies with all legal requirements, including particular state, territory and local government regulations. “There are certain businesses that cannot be started from home in Australia like opening a small hospital in your house premises or that need special permits like having a day care center. Moreover, businesses that attract a large amount of traffic are not allowed to be started from home”, explains Schuler. “This is why knowing all the legal requirements to start a business from home is as important as the business idea itself”.
Once you have established that your business idea can in fact be carried out in the confines of your home, you will need the required licensing and permits. The Australian Business License and Information Service provides complete information on the licenses, permits and other registrations that are mandatory for your home-based business. Some of these licenses are general and some may apply specifically to your particular case, so be sure to read carefully and ask all the questions you need.
• General licences: These include the business or company name registration, registration as an entrepreneur and registration as an employer (in case you are planning to employ staff), as well as the ABN, GST and other similar taxation registration that may apply.
• Specific Licences: your home based business may require certain specific license requirement. For example, a café or a restaurant requires a “Sidewalk Café Permit”. This is an extremely important step to follow because the absence of a specific license can mean the closure of your home venture.
• Permit for Advertising Signage: Your business may require a permit from your local council in case you plan to advertise it in public areas.
Basic Taxation remains the same as it does for other small businesses. This means that if required, you will need to register your business for the following:
• Tax File Number (TFN)
• Goods and Services Tax (GST)
• Fringe Benefits Tax (FBT)
• Pay As You Go (PAYG) withholding
• Pay As You Go (PAYG) instalments
• Payroll tax
Other basic taxes will also apply like income tax, Capital Gain Tax, Stamp Duty and other similar charges.
Employing people for home-based business
Like any other small venture, a home-based business can employ any type of employee, including a part-time or full-time worker. However, it is essential for the home-based business operators to follow rights, responsibilities and obligations under the Fair Work Act 2009. The government of Australia has provided guidance regarding the national workplace system which includes important aspects like minimum wages, modern awards and other National Employment Standards.
Insurance for home-based small business
As with any other type of business, your home-based startup can be exposed to all sorts of risks and hazards, rendering insurance unavoidable. Some of the insurance policies are mandatory and are required by the government of Australia. However, there are other policies that are not mandatory by law but are important to protect your home-based business from undue risks. Some of these insurance policies include:
• Public liability cover for persons visiting your business at home
• Insurance of business equipment including office furniture and computer equipment.
• Fire, storm and theft insurance
• Professional indemnity insurance, especially when your home-based business is contracting with the government of Australia
• Loss of income due to personal accident or illness
Australian Government Assistance for home based business
“The government of Australia provides a pool of information to the home-based business owner that guides him/her through all the legal requirements and regulations, which can be a bit too much sometimes”, says Schuler. Here are some of the most important links that can help you guide your home-based small business to success while complying with all the government-imposed conditions.
For information on licenses and permits: the Australian Business Licence and Information Service (ABLIS)
For employing people: Fair Work Ombudsman’s Small business page
For employer and employee responsibilities: Fair Work Act 2009, including the Fair Work Handbook (DOC 230KB)
For information on Tax: Australian government business website
To search and compare insurance: Directory