Businesses take many different shapes and forms. As a result, the premises that businesses conduct business from often vary in accordance with their specific set of needs and future growth plans. In this article we will explore the number of locations your business can operate from so that you can choose the right business location for you and your business needs.
Why does where your business is based matter?
Business locations are often thought of purely from a business perspective. This includes thinking of things such as foot traffic, car parking, proximity to competition and suppliers and the type of building or structure. Whilst these are valid considerations, your decision-making journey shouldn’t stop there. There are number of considerations that you need to be fully aware of before committing to any one location. Your choice of business location determines your: –
- Insurance requirements;
- Licence and registration requirements;
- Tax obligations;
- Business operational costs; and
There are a number of external considerations that if explored before committing to any one location, can save you further down your business journey. These include:-
- Council allowing businesses of your kind to run in your location;
- Future development plans of the locations surrounds;
- Relevant zoning laws and how they may apply to your business activity; and
- Planning permit requirements.
Which location suits you?
There are a multitude of different business locations that you can choose from. These include warehouses, retail premises, home office, commercial officers and temporary locations. Due to the vast number of choices and plethora of circumstances that goes in to determine the exact right premises for your business there is often a need for very tailored advice on this point. However there are some things you should know to help get you started.
Home office/ home business
As a result of COVID-19, home offices/ home businesses have become increasingly popular. People see them as an effective way to allow themselves the flexibility they are after, whilst ensuring that they can meet their customer’s needs. The advantages of this location generally include:-
- No need to lease or the purchase another property;
- No additional utility service charges and rating costs; and
- Potential tax deductions for home operational expenses whilst working;
Whilst the home office is an attractive business location, also be aware of the potential drawbacks associated with running a business from home. These include: –
- Potential capital gains tax payable on principle place of residence when time comes to sell;
- You may still need to consider public liability, professional indemnity and product liability depending on the type of business that you are running;
- Your type of business may be in conflict with your surrounding residential area zoning requirements;
Market stalls are a great way to get a business up and running. They are a temporary structure that allow you to sell your goods and services directly to your customer with little overhead operational costs. The advantages of this location typically include:-
- You are able to avoid all the overheads of commercial leasing whilst still gaining access to customer foot traffic;
- No additional tax consequences outside of those associated with running your business;
- No need to pay rates or other utility costs commonly associated with other business location types.
Potential drawbacks of the market stall are largely business context dependent including irregular business (due to markets running for a limited time on certain days) and always needing to move your business and its product. However, there are also additional drawbacks including:-
- There is still a need for you to be insured including having public liability and product liability insurance as well as potentially professional indemnity insurance.
Leasing of a commercial premises
Commercial premises come in a number of different forms including warehouses and retail premises. Each of these types of locations come with their own unique set of considerations, however there are a number of elements that present as an advantage no matter which premises your business requires to lease. These include:-
- It isn’t as important for you to consider future development plans of the location as you can relocate your business if need be;
- You are not required to have access to the up front cash that would otherwise be required if you were purchasing a premises;
- Issues under the lease which fall under the landlords obligations are to be rectified by the landlord.
Whilst there are a number of positives, there are an equal a number of drawbacks of entering into a commercial lease for a business location. These include:-
- You will still be required to pay any operational costs passed on to you under the lease;
- You have less control over what you can and can not do on the premises including what alterations can be made without seeking prior consent;
Buying a commercial premises
Buying a commercial premises is likely something that you are not really considering, however it doesn’t mean that you shouldn’t be aware of the potential positives and negatives that are associated with owning your business location. These advantages include:-
- You have greater control over the premises as you are the owner allowing you to make alteration to the premises as needed;
- You benefit from any appreciation in value of the premises’ as a result of any market shifts or improvements made by you.
Whilst owning a premises affords you these benefits, it also comes with a number of key drawbacks which prevent a number of businesses owners from ever seeking to own their own premises. These include:-
- High upfront costs and the prerequisite borrowing capacity that is likely associated with needing to acquire the funds to purchase a commercial property;
- Running costs associated with the premises including rates, insurance and utilities;
- The future development plans of the area can impact the viability of the commercial premises moving forward;
It is also worth noting that a number of the drawbacks associated with some of the business location options can be negated or managed through the structuring of your business. For more information on business structure, see article 1 of the Small Business Series here.
Specific legal advice based on you and your business’s current and future needs may be required to ensure that the correct business location is chosen from the beginning. Contact the Robertson Hyetts team to help you get started on your business journey or assist you in a commercial property transaction on (03) 5434 6666 in Bendigo or (03) 5472 1588 in Castlemaine.