Setting Up Your Accounting Business for Success: Key Legal Considerations

In Short

• Select the Right Business Structure: Choose a legal structure—sole trader, partnership, company, or trust—that aligns with your business goals and risk tolerance.
• Register and Comply: Register your business with ASIC, obtain an ABN, and consider GST and PAYG registrations. Ensure compliance with professional standards set by bodies like CPA Australia or CAANZ.
• Protect Client Data: Implement robust data security measures to safeguard client information and comply with privacy laws.

Tips for Businesses

Establish clear client contracts outlining services, fees, and responsibilities to prevent disputes. Secure appropriate insurance to protect against potential liabilities. Stay informed about anti-money laundering laws to ensure full compliance.

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Table of Contents

• 1. Choosing the Appropriate Business Structure
• 2. Business Registration and Compliance
• 3. Insurance and Liability Protection
• 4. Client Contracts and Engagement Letters
• 5. Data Security and Privacy
• 6. Tax Obligations for Your Business
• 7. Anti-Money Laundering and Counter-Terrorism Financing Regime
• Key Takeaways
• Frequently Asked Questions

Starting an accounting business involves more than managing numbers—it requires careful planning and structuring to meet your legal obligations. By addressing these key areas, you can ensure your accounting practice is built on a solid and compliant foundation. This article explains the legal steps to start an accounting business, including structure, registration, insurance, and compliance with privacy and AML/CTF laws.

1. Choosing the Appropriate Business Structure

The first step in launching your accounting business is deciding on the right legal structure. Your choice will influence your taxes, liability, and administrative requirements. Common options include:

• Sole trader: You’re the sole owner and bear personal responsibility for any debts.
• Partnership: Shared ownership between two or more people, with shared responsibility for profits and liabilities.
• Company: A separate legal entity that provides limited liability but requires more regulatory oversight.
• Trust: A structure where assets are held for the benefit of others, typically offering tax advantages but with more complexity.

2. Business Registration and Compliance

After deciding on your structure, you need to register your business legally. In Australia, this involves registering with the Australian Securities and Investments Commission (ASIC) and applying for an Australian Business Number (ABN). Depending on the scope of your services, you may also need to register for Goods and Services Tax (GST) and Pay As You Go Withholding Tax (PAYG).

Ensure you adhere to professional standards and regulatory requirements set by governing bodies like CPA Australia or Chartered Accountants Australia and New Zealand (CAANZ). 

3. Insurance and Liability Protection

Professional indemnity insurance is non-negotiable for accounting firms. It protects you from legal claims arising from errors, omissions, or negligence in your work. Even a small mistake could have significant financial and legal consequences for your business without adequate coverage.

4. Client Contracts and Engagement Letters

Well-drafted contracts are critical to managing client relationships and expectations. Engagement letters or service agreements should clearly outline the scope of your work, payment terms, and conditions for ending the agreement. These documents protect you and your clients from misunderstandings and potential legal disputes.

5. Data Security and Privacy

Given the sensitive nature of financial data, accountants are responsible for ensuring client information is protected. Compliance with privacy laws, such as Australia’s Privacy Act and the Australian Privacy Principles (APPs), is mandatory. Implement secure systems for managing data, including encryption and restricted access to client information, to prevent breaches and maintain client trust.

6. Tax Obligations for Your Business

As an accountant, staying on top of your business’s tax obligations is essential. Keep accurate records, assess your financial performance regularly, and prepare for tax filings well in advance. Staying organised and compliant with tax regulations will keep your practice running smoothly and set a good example for your clients.

7. Anti-Money Laundering and Counter-Terrorism Financing Regime

Moreover, the landscape of financial compliance has shifted significantly for accountants in Australia with the recent expansion of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime. As of 2025, accounting firms will be classified as ‘tranche 2 entities’ under the AML/CTF regulations. 

The designated services now subject to AML/CTF obligations include:

• managing client assets
• managing bank savings or securities accounts
• involvement in real estate transactions; and 
• assisting with the creation or management of legal entities or trusts. 

Compliance with the AML/CTF regime will mandate six key obligations for accountants:

1. enrolment with AUSTRAC;
2. development and maintenance of a tailored AML/CTF program;
3. conducting initial customer due diligence;
4. performing ongoing customer due diligence;
5. reporting of certain transactions and suspicious activities; and
6. maintaining comprehensive records.

Requirements

To meet these requirements, accountants can take several proactive steps to align themselves with the new regulations:

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Key Takeaways

Several key legal considerations must be addressed when setting up an accounting business in Australia. Choosing the right business structure is crucial, affecting taxation and liability. Proper registration with ASIC and obtaining an ABN are essential, along with adhering to professional standards. Additionally, securing professional indemnity insurance protects against potential claims, while clear client contracts and engagement letters help manage relationships and expectations. Implementing robust data security measures ensures compliance with privacy laws and maintains client trust. By carefully addressing these areas, you can establish a solid legal foundation for your accounting practice’s success.

If you have further concerns about setting up your accounting business, our experienced business lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions