Social media is cutting edge for getting your brand out there. You may already be aware of this and have a thriving business established entirely on Instagram. When starting a new business including an Instagram business you may need an ABN. Read on to find out if you are missing some key legal requirements.
What is an ABN?
ABN just stands for Australian Business Number which is an 11 digit number. Depending on your business structure it will affect how you apply for an ABN. However, as an Instagram business, it’s probably just you running the show. This would make you a sole trader.
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Does an Instagram business need an ABN?
The ABR is your source to working out whether you need an ABN. There are usually a range of features which you can apply to your Instagram business to work out if you need an ABN. A key feature is you intend to make a profit, this means even if you aren’t breaking even you would still match this criterion. Another feature is that you walk, talk and act like other businesses in the industry. This means you are acting like a business by being organised, doing marketing, selling products and keeping records. If you didn’t meet the criteria for needing an ABN you would be classed as a hobby not a business.
Example
Jacob makes cakes in his kitchen for his family and friends and doesn’t charge for them. Occasionally, he posts photos of his cakes on Instagram. One of Jacob’s friends sees the photo on Instagram and asks if he can make the same cake for him for $60. This is a one time only transaction. Jacob isn’t acting like a business he just posted a photo and unintentionally sold a cake to a friend that one time.
Example
Simone also makes cakes for her family and uploads the photos to Instagram. Simone regularly posts 1 cake photo a day and she displays the prices under the photos. The difference between Simone and Jacob is how Simone is beginning to become structured and organised. There is a routine, there is an intention to gain buyers. She isn’t just posting the photos for fun, she expects people to buy the cakes either through messaging her or going through a link to a website.
The case of the Instagram Influencer
The basic model for an influencer is that over enough time you gain a large following like 50,000 followers. Brands then see you as a way to push their products to your followers. The brands then pay you in return for showcasing their products. In that case, you are selling your skill and marketing power which is your large follower base in return for payment. If this is an organised and ongoing activity you are likely to meet the criteria of a business. Think of the model of an advertising agency, you pay them money to go and spread your product. Companies will often engage influencers through a formal agreement that outlines the terms of the business relationship. Just because you operate on Instagram, that doesn’t mean you are exempt. If you are still unsure of whether you meet the criteria you can always check with a business lawyer.
Conclusion
An ABN shouldn’t be a scary word, it is just a way of identifying your business. Having an ABN will make your business be more legitimate when you can quote an ABN on invoices. If you have an ABN you can then make tax deductions as well for business expenses.
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