If you are unsure about the legal aspects of starting a cafe but are interested in opening one, we set out a legal checklist that you should mark off before dusting your frothy cappuccinos with chocolate.
Before you open your coffee shop, you need to consider what kind of business structure would suit you. Do you want to operate as a sole proprietor or company? If you plan on going into business with a friend, a partnership is also an option. No one business structure suits everyone. The right structure has to fit you and your business plans. For example, if you would like to open a second cafe at another location in the future, a company structure would be best. Being clear at the outset will guide your steps as you work towards opening your coffee shop. Regardless of what business structure you choose, you will need to apply for an Australian Business Number.
Every business requires adequate funding – especially in the early days as you build up goodwill. A lot of businesses access capital by taking out loans with commercial banks. However, it is sensible to research what’s available.
When researching your loans, ensure that you speak with someone at the bank. Do not be shy about asking questions and before signing any documents, make sure you understand your rights and obligations.
Requirements for a Cafe
As you are opening a coffee shop, you will likely prepare and serve food. You will, therefore, need to know and abide by the Australia New Zealand Food Standards Code as well as other relevant food safety requirements. You will also need a Food Safety Supervisor and to undertake regular food inspections.
If you plan on seating patrons on the footpath, you must apply for a permit with your local council. You will also need to comply with all regulations that oblige you to provide a smoke-free environment.
Take the time to understand your competition and customers. Are you located in Sydney’s busy CBD where takeaway lattes are the order of the day or in a neighbourhood where people walk their dogs and enjoy a long brunch?
As a business, you will be required to pay Income Tax and Goods and Services Tax (GST) and will need a Tax File Number.
To pay GST, you will need to register with the Australian Taxation Office. Paying GST means that you will have reporting obligations including submitting BAS Statements.
To prevent these requirements becoming onerous, take the time to plan your accounting system. You will also need to institute good daily practices to make doing your accounting work easier.
Even if you intend to have a professional take care of your formal reporting requirements (like BAS Statements), the better your records, the less money you will have to pay them. Making sure your costs remain reasonable is a fiscally prudent strategy, especially in the early days of your business.
Your coffee shop will need insurance, especially Public Liability Insurance. Speaking with an insurance broker is a good idea because they can assist you to navigate the insurance market and also find you the best quotes. Certain bank loans are also conditional on insurance so know what your loan requires.
You will need to find the right premises for your coffee shop. Once you do, you will require a development approval from the local council. It is always a good idea to check that a commercial enterprise can carry out business on those premises. Local councils will always be able to answer any questions you might have and can guide you as to the correct process.
If you plan to make alterations, your plans need council approval. Once work is complete, the council must certify it. The process involves time and cost so careful planning and preparation are essential.
Setting up a cafe is an exciting venture, and it’s important you get off to the right start. Research your market and take care of your legals early so you can concentrate on producing the best coffee. If you have any questions, get in touch with our commercial lawyers on 1300 544 755.
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