Top five legal considerations when starting up
Starting a business can be rewarding and exciting, but it’s important to get the legalities right in the beginning.
Here are our top five legal considerations when starting your own business:
1. Choose the right structure
Choosing the right business structure is important because it will have implications for the life of the business. The structure you choose will depend on many things including the type of business you will be operating, your appetite for risk, required level of flexibility, cost implications of each structure and tax consequences.
Generally there are four main options when considering your structure:
- Sole trader – a business owner trading on their own
- Partnership – two or more people or entities running the business together
- Company – a separate legal entity from its shareholders
- Trust – an entity holding the assets of the business for the benefit of others
A lawyer can run through the pros and cons of these structures with you to help you make the right decision.
2. Document the structure
If you’re going into business with other people then it’s a good idea to document the arrangement. Documenting the rights and obligations of all parties is particularly useful in the event of success or disputes between owners.
Common documents used to structure the relationships between business owners are Partnership Agreements and Shareholder Agreements. Ideally both should be drafted by a lawyer and tailored to your circumstances.
3. Consider your obligations
Once you’ve chosen your business structure you’ll then need to consider the legal framework you’re operating in. For instance, are you required to hold any particular licences or permits? Are you required to provide a certain level of skill, care and diligence? Are you required to provide refunds?
Depending on the business you operate there will be particular laws and regulations that govern the operation of your business and it’s important you know about them.
4. Protect yourself
Whenever you start a business it is crucial that you protect your business’s assets.
Intellectual property is one of the main assets that business owners fail to protect.
Intellectual property can include things like:
- your trademark
- copyright
- your brand
- domain name
- recipes or products you’ve created
Business owners frequently underestimate the value of their intellectual property, but it can be one of your biggest assets.
Other ways to protect yourself include having properly drafted terms and conditions. These are particularly useful when it comes to payment terms because every business owner needs to get paid.
Privacy policies are also a great way to not only ensure your business is complying with the privacy legislation, but also to let your customers know you are responsible and professional in the way you handle their personal information.
5. Employer responsibilities
If you intend to have employees you need to consider the conditions of employment that you will offer to your employees.
There are certain minimum standards in Australia that apply to all employees – such as minimum wage – and certain awards that apply in particular industries that provide a further ‘safety net’ for employees.
You should familiarise yourself with these standards and your obligations under the Fair Work and Occupational Health and Safety Acts to make sure you are operating lawfully.
Many business owners provide conditions above the minimum required by law and they enter into employment contracts with their employees to reflect the arrangement.
We recommend that you have formal employment agreements in place with your employees, not only so the rights and obligations of each party are clearly documented, but also for the event of a dispute with an employee.
