How to start your own consultancy
A Step-by-Step Guide to Starting Your Own Consultancy in Australia
Step 1: Identify applicable restraints.
While seemingly obvious, ensuring you are eligible to establish your own firm should be the first step on your self-employment journey. A thorough check for employment trade restraints, namely in past employment contracts, will outline your ability to conduct business in a similar field. While only enforceable in the case of ‘legitimate interests’, you could be at risk of legal proceedings from past or present employers if you breach the agreement.
Cybermarket tip: If you suspect your consultancy may be in breach of a contractual agreement, it’s advisable to seek expert-led guidance through an employment lawyer.
Step 2: Consider a shareholder agreement.
A legally-binding contract, shareholder agreements stipulate key information, such as the company’s hierarchal structure, the responsibilities of each shareholder, and an outline of how the company will run, all in a bid to protect each shareholder's financial stake.
If you intend to bring shareholders on board, a written agreement works as an impactful conflict-resolution tool, ensuring rights are nurtured, shareholders are protected, and the company is run to the standards of all members. While it’s not a legal requirement to have a specialist curate the agreement, it’s advisable to seek a legal professional to oversee the agreement, avoiding negative ramifications if unexpected circumstances arise.
Step 3: Consider your structure.
When opting to found your own consultancy, there are a number of avenues to explore. From tax and liability concerns to costs and complexities, there are key considerations to account for.
Sole Trader: The simplest and cheapest option, if you’re the sole owner of your business you may opt to register as a sole trader. This route means you and your business are one in the eyes of the law.
ü You can hire employees.
ü Ultra-efficient tax returns.
ü Potential to pay less tax.
X Liability is solely on you, including debt.
X If you fall into bankruptcy, personal assets will become at risk.
X Limited options for tax.
Limited Company: Operating as a separate entity from yourself, limited companies are the premier choice for business owners looking for liability and tax advantages.
ü Your personal assets remain safe.
ü More tax flexibility, such as splitting between family members.
ü More opportunity, including investors and business partners.
X A complex structure.
X More costly.
X Time-consuming to set up and file tax returns.
Trust: Like a sole trader, trusts are viewed as ‘one’ with the trustee in the eyes of the law, often used by those who wish to own shares in their company.
ü Revenue can be distributed throughout.
ü Enhanced company privacy.
ü 50% capital gains discount.
X More costly – taxed at the highest rate.
X More complex – money must be distributed annually.
X Limited opportunity – difficult to borrow funds.
Dual Structure: The process of setting up two companies; a ‘holding company’ to hold assets, and an ‘operating company’ for employment. This route provides more protection, with owners often having shares in the holding company.
ü Advanced protection.
ü Limited liability.
ü Enhanced opportunity.
X More complex.
X Time-consuming operations.
X Not completely protected.
Step 4: Seek the relevant certifications.
Ensuring the golden trio of trust, knowledge, and legal protection, securing the relevant licences and certifications will ensure your consultancy sets off on the right foot. Depending on your industry, you may require qualifications that endorse your specialism to perform in your respective arena.
Take the financial realm, for example. Issued by the Australian Securities and Investments Commission (ASIC), those offering financial services must hold an Australian financial services (AFS) licence, meaning holders must take adequate measures to keep themselves protected from cyber breaches, or risk becoming the subject of legal proceedings, as seen in a case involving RI Advice Group.
Cybermarket Tip: If in doubt, seek location-specific advice HERE.
Step 5: Develop a client agreement.
Clearly outlining your business relationship, client agreements serve a range of mutually-beneficial purposes. From protecting both entities legally to limiting your liability, as well as ensuring both consultancy and client are on the same page, they’re essential for positive, purpose-driven engagements.
Ultimately, client and consultancy agreements are curated to explain the terms of the working relationship, namely the scope of services the consultancy will provide, payment terms, mediation clauses, liability, and the route to agreement termination. Clear parameters ensure reliable results.
Cybermarket Tip: Utilise our template to ensure your agreement is legally binding. [Add hyperlink here]
Step 6: Branding.
An integral part of the consultancy process, branding will help your business transform into an industry powerhouse, establishing trust and creating client loyalty. The key to standing out in the cyber market, if you’re set to trade under a name other than your personal name, registering a business name that aligns with your vision will distinguish your services while enhancing credibility.
Known as a ‘badge of origin’, larger consultancies may consider a trademark registration, protecting your brand name and helping readers distinguish your services. With applications ranging from $250 to $330, there are a number of eligibility clauses to meet, such as ensuring your trademark is original, avoiding applying to trademark common words/phrases, creating a trademark that can effectively distinguish your services, and agreeing to your personal information being made available alongside your application.
Step 7: The all-important insurance.
As a cybersecurity consultant, it’s no secret that keeping your business protected from threats is key to longevity. From data breaches to malware attacks, insurance will act as the ultimate back-up, ensuring risks are minimised and protection is secured.
Professional Indemnity insurance provides cover for claims stemming from clients, from financial loss to injury and property damage, as a result of your mistake or negligence. Compulsory in a number of industries, professional indemnity insurance provides cover in a range of areas, including negligent advice, data breaches, and professional errors.
Public Liability insurance provides cover for compensation and legal costs. Ultimately, it’s there to offer protection in the event an external party – a client or member of the public – experiences an injury or loss as a direct result of your negligent business practices. While it’s not a legal requirement in Australia, it’s strongly advised to mitigate risk.
Step 8: Contractual agreements.
To keep both entities protected from disputes, contractual agreements between the cybersecurity consultancy and employees/ contractors are vital for seamless collaborations. While an informal spoken agreement during the early stages of your foundation may seem sufficient, contracts act as a safety net, outlining the responsibilities of each entity, providing clarity from the outset.
A legally-binding framework to safeguard the relationship, a written agreement should contain an outline of the end result – what should be achieved and how to get there, the precise dates the collaboration will span between, and the premises where the work will be completed.
Cybermarket Tip: If you don’t intend to seek specialist assistance in drafting an agreement, it’s advisable to use plain, jargon-free language, with as much detail as possible included.
March 03, 2023