As we are moving this week, it seemed appropriate to “move along” in our series of articles designed to alert the first time or experienced business client to some dangers in establishing new ventures.

Many clients do seek advice about coming to an agreement with another party to go into business. But in order to save money - many do not! Unfortunately they often end up in cash flow crisis or in a vicious dispute with the very people they trusted to start out in business in the first place.

Here’s a checklist of some items to consider!

• If you know your business structure, have you considered tax implications - such as setting up a joint venture versus a company either overseas or in Australia?
• If you are buying a company by purchasing its shares, what are the tax implications of becoming a shareholder in a company set up overseas or in Australia? What liabilities of the company do you take with the company itself?
• If you are licensing your product for manufacture or distribution by third parties, how are the royalties which are paid to you or your entity be taxed? If you need to draw an income or a salary, have you considered the taxation of taking drawings versus a salary?
• Who should own your shares in the new entity and what are the tax implications of the dividends (i.e. your share of the profits) that are distributed to shareholders?
• Where is the initial working capital going to come from to pay for leasing of premises, the cost of raw materials, labour, plant, machinery and infrastructure?
• Have you considered the following costs like moving, (ouch!), marketing, promotion, advertising or transportation costs?
• Is there a detailed agreement about how much the remaining shareholders are expected to invest in the company and how much the company will borrow to fund its operations? 
• Is there a forecasted budget and cashflow incorporating capital and operating expense requirements so the money doesn’t just run out? 
• Did you prepare forecasted financial statements including provision for future taxation liabilities.

Get some advice before you dive straight in. It might be the best saving you ever make!

Related Havilah Legal service(s): Commercial Litigation