ESTABLISH LEGAL AND RISK MANAGEMENT REQUIREMENTS OF SMALL BUSINESS

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ESTABLISH LEGAL AND RISK MANAGEMENT REQUIREMENTS OF SMALL BUSINESS UNIT BSBSMB401A This unit involves identifying and complying with the business regulatory,

KEY CONCEPTS Business ownership structures Business name Legal requirements and implications Agreements, permits and licences The protection of intellectual

1 ESTABLISH LEGAL AND RISK MANAGEMENT REQUIREMENTS OF SMALL BUSINESS UNIT BSBSMB401A This unit involves identifying and complying with the business regulatory, legal, taxation and insurance requirements and risk management needs of small business. KEY CONCEPTS Business ownership structures Business name Legal requirements and implications Agreements, permits and licences The protection of intellectual property Australian taxation principles and requirements GST requirements Pay As You Go tax system Business deductions Permits and restrictions impacting on a business Operating a business from home Insurance Contract law Contract negotiation 1 1

CHAPTER 1 THE LEGAL STRUCTURE OF YOUR BUSINESS BUSINESS OWNERSHIP STRUCTURES One of the important decisions you must make regarding your business is its legal structure.

2 CHAPTER 1 THE LEGAL STRUCTURE OF YOUR BUSINESS BUSINESS OWNERSHIP STRUCTURES One of the important decisions you must make regarding your business is its legal structure. The most common types of business structure available in Australia include: 1. Sole proprietor/trader 2. Partnerships 3. Companies 4. Trusts. Your choice of the most appropriate legal form of organisation for your business will depend upon factors such as: the size of the business the number of people involved the type of business the cost and difficulty of establishment taxation considerations maximum economic rewards financial considerations, both present and future superannuation considerations management control and independence acceptability of government interference the need for additional skills exposure to risk/liability of individuals your own personal preference. 1. SOLE PROPRIETOR/TRADER A sole trader is one who trades as an individual, without the use of a company structure or partners. The proprietor is the sole owner of the business and has complete control over it. Therefore, the individual bears the full responsibility for the actions of the business. This is the simplest form of business ownership and can be commenced with little financial outlay. The sole trader can trade under their own name, or register a business name. However, registration of a business name does not make the sole trader a separate legal entity. The business belongs to the sole trader who is personally responsible in law. Registration under a business name has no legal implications other than to allow that individual to use and trade under that name. A distinguishing feature of the sole trader is the nature of any legal liability. While the sole proprietor retains the profits from the venture, the liabilities with regard to claims from creditors extend to private assets. No distinction is made between business assets and private assets. 3 3

Chapter 1: 2: The Legislation Legal Structure Codes and of Your Regulatory Business Requirements INSURANCE Starting out in business is a major risk.

Insurance is a method of protecting a person or business against financial loss resulting from damage to, or theft of, personal and business assets (general insurance), and death or injury (life and

3 Chapter 1: 2: The Legislation Legal Structure Codes and of Your Regulatory Business Requirements INSURANCE Starting out in business is a major risk. Insurance is one means of minimising this risk, by providing protection against loss. Insurance is a method of protecting a person or business against financial loss resulting from damage to, or theft of, personal and business assets (general insurance), and death or injury (life and accident insurance). An insurance policy is a legal contract whereby, in return for an insurance premium, the individual or business obtains cover against financial loss as a result of particular or unforeseen events. It is important for you to consider your insurance needs carefully. Often the initial expense of insurance premiums can save a great deal of heartache in the event of an unforeseen disaster. As you will probably not be able to afford all the insurance you need, you must prioritise the risks to be covered. It pays to shop around for your insurance policies, as premiums can vary considerably between companies. Further, different companies offer a variety of insurance packages, which for example, may include all the key policies for shopkeepers. Insurance brokers can also be used. The outline of insurances to follow is by no means exhaustive, but rather an indication of the common areas of risk that could be covered by small business owners. The main types of insurance relevant to small business owners can be divided into three categories: compulsory insurances essential insurances useful insurances

4 Chapter 1: 2: The Legislation Legal Structure Codes and of Your Regulatory Business Requirements 74 74

MOTOR VEHICLE EXPENSES Self-employed persons are required to prove their claims for motor vehicle expenses, if their motor vehicle is a motor car, station wagon, panel van, utility or similar

5 MOTOR VEHICLE EXPENSES Self-employed persons are required to prove their claims for motor vehicle expenses, if their motor vehicle is a motor car, station wagon, panel van, utility or similar vehicle, or other road vehicle designed to carry less than one tonne or fewer than nine passengers. Even if your vehicle fits one of the categories listed above, the following rules for proving claims will not apply if your vehicle is: a taxi, panel van, utility or other non-passenger commercial vehicle used only for business purposes and for travelling between home and work. a car that is unregistered throughout the whole of the income year and used principally for business purposes. Claims for such vehicles and other types of business vehicles, for example, vans, larger utilities and trucks, should be based on your actual expenditure on the vehicle, for example, costs of registration, insurance, repairs, fuel, oil, interest or lease fees, and so on. No other records need be kept. Methods of claiming car expenses If your vehicle is one which requires you to prove your claim for motor vehicle expenses, you may choose from one of four methods to calculate your claim. (i) Rate per kilometre method: This method can be used if you do 5,000 business kilometres or less. Records you need to keep are: engine capacity in cubic centimetres how you calculated the kilometres travelled. The amount you can claim depends on the size of your car s engine. Check with the ATO for rate

COMPLY WITH REGULATORY, TAXATION AND INSURANCE REQUIREMENTS FOR THE MICRO BUSINESS

COMPLY WITH REGULATORY, TAXATION AND INSURANCE REQUIREMENTS FOR THE MICRO BUSINESS UNIT BSBSMB305A This unit describes the performance outcomes, skills and knowledge required to outline the regulatory,