How to Start a Bookkeeping Business – Your Business Structure

When you are commencing your bookkeeping business, you will need to decide on the structure you will use to trade. Are you going to be a sole trader or are you registering a Company? Will you go into the business in partnership with another bookkeeper and split the profits?

Although most bookkeepers understand the different business structures, it is import to be reminded of the pros and cons of the most popular choices available.

Sole Trader – This is a very popular business start up method due to the minimal cost involved. It is cheap to set up, administer and maintain. In Australia, a sole trader can apply to the Australian Taxation Office (ATO) for their ABN and they are underway.

Additionally if you wish to trade as a sole trader under something other than your own personal name, you can register a business name with the State you operate in. As business names are administered on a State basis if you want to trade in more than one state you will need to register your business name in each state. Being a bookkeeper, this probably will not apply as you will most likely operate in one state only.

Once you have your business name registered, you can then take your certificate of registration and open any accounts you require such as bank accounts and post office box accounts in your business name.

Some of the benefits of being a sole trader include access to personal income tax rates from the profit of your business endeavors, the cheap set up costs and minimal reporting requirements.

One of the biggest downsides to being a sole trader is the lack of asset protection. If anything goes wrong ion the business you are liable and if you are sued you do not have any asset protection. Anything in your name personally is fair game.

Another aspect which you may need to be aware of if ustilising a sole trader structure is the alientation of personal services income legislation. As a sole trader you will need to meet certain requirements to deem yourself a business. As a bookkeeper you may already be aware of this, but it is important to look at the legislation so you can be sure you will be classified as a true business to maximize your deductablilty of expenses in your business.

Company – This is more expensive to set up and administer as there are registration of the company fee payable to the Australian Securities and Investments Commission (ASIC) currently $400 for a Company registration. Then there is an annual filing fee of $65. There are also administrative requirements to run a company as well as the standard ATO reporting.

The main issue for people when choosing a Company set up is the cost and the ongoing administrative requirements. The positive aspect of choosing a company however is the limited liability protection available. This way if anything goes wrong, it is the Company which gets sued and generally not the owner of the business and your personal assets are protected as you are not personally liable for Company debt.

Additionally the taxation rate of a Company can be of influence. Since Companies are taxed at a flat rate of 30%, for some people this is better than their personal taxation rates and it is a positive factor. For others this tax rate may be much higher than their personal tax rates and it is a negative. It just depends on your personal circumstances.

Partnership – Sometimes people want to split the risk of a business venture and going into partnership with others. Predominantly most bookkeepers start out by themselves, but if you are interested in starting your bookkeeping business with someone else you might investigate the partnership opportunities.

Basically the partnership records all the applicable income and expenses and the ending profit is split between the partners and included as income on their personal tax returns. Partnership income is then taxed at your own personal tax rate which for some people is advantageous.

A draw back of a partnership is having to consider the other partners in business decisions. Additionally the partners are jointly and severably liable for any debts of the partnership. This means if you owe money to some one, even if you and your partner split things 50/50, if your partner can’t pay their 50% you are liable for it.

Think about your structure before you start your bookkeeping business and it will serve you well for many years to come.

Tips on Starting a Bookkeeping Business From Home

Being you own boss and not working for somebody is the best thing that can happen to you. If you are exploring the option of starting your own business from home then select the one which has a low entry barrier and requires minimum initial investment.

One such business is the bookkeeping business which meets the basic criteria of low technical know how as well as requires just an investment in desktop computer. That said the low entry barrier means that there will be very tough competition and you will have to use all your marketing skills to drum business.

If you do not know bookkeeping then the first thing that you need to do is to make sure that you have the understanding of the bookkeeping business. The best way to learn the bookkeeping business is to make sure that you get yourself enrolled in the online bookkeeping courses or classes. These are adequate as far as providing you with the expertise on bookkeeping.

The next step is to have the accounting business cards printed and also make sure that you have the business registered with the local chamber of commerce. To gain a few clients you may have to reduce your bookkeeping rates initially. That said there may be some difficulty and it is your persistence that will pay off.

Once you have few clients then the next logical step is to hire freelance bookkeepers to work the business for you and you should concentrate on getting more business. The bookkeeping business is really volume business. The more the volume the more profits you will make.

Easy Way to Start a Bookkeeping Business – Bookkeeping Subcontracting

There are many ways that you can realize your dream of starting a bookkeeping business. One of the easier ways is bookkeeping subcontracting.

Get contact with your local accountants and tell them that you are just starting out in this line and are able to deal with any bookkeeping or accounting assignments. Some of them are more than happy to refer you to their clients because many a time bookkeeping is not their main source of income. This is usually termed as bookkeeping subcontracting.

There are many benefits of this kind of arrangement. Firstly, you get to broaden your horizon because of the opportunity of exposing yourself to different type of business bookkeeping. Secondly, your risk of not being paid by your clients is much lower since you will be paid by your local accountants. This saves you from dealing with collecting debts and hence you can spend more time on other productive activities.

On the contrary, bookkeeping subcontracting does has its limitations. It restricts you from building your own clients base and therefore it should be a temporary measure to sustain your bookkeeping business. In the long run, you should allocate sufficient time to network with business owners, conducting talks on business bookkeeping, send out sales letter to potential customers of your services so that to reduce your reliance on local accountants.

Starting a bookkeeping business can be relatively easier. But it is generally agreed that the more difficult part is how to sustain it in the long term without bookkeeping subcontracting.