I work with startups, which is to say I work with that strange breed of people whose lives are fuelled by equal parts excitement and enervation. Starting up exhilarating and overwhelming – it’s all too easy for entrepreneurs to get swept up in the adventure, meaning basic business requirements can be overlooked.
Neglecting to address basic legal questions at the outset can lead to costly mistakes down the line. I see this time and time again, to the point where I have a ready-made legal checklist in my head for new clients.
Here are the key considerations towards legal and financial protection of your new business:
Business structure
What type of structure do you use to run your business? It always surprises me how many new business owners haven’t considered this. The first step is to clearly identify what kind of business you are:
- Sole trader
- Partnership
- Company, or
- Trust?
Don’t feel bad if you’re unsure – it is very common for people starting their first business. ASIC has a comprehensive outline of different business structures on their website.
Agreements
The next legal hiccup all too many new businesses run into is a lack of clear, legally watertight agreements. Here are the questions I ask my clients:
- Is your business structure evidenced by written agreements?
- Do you know where they are?
- When were they last reviewed?
- Have you created an exit plan in case of changed circumstances?
- Is there a succession plan for your retirement?
Leases/property
Where your business operates from can be the cornerstone of success. You need a solid legal foundation in place to ensure that base isn’t jeopardised. Ask yourself:
- Do you rent your premises?
- Do you have a written licence agreement for your hot desk space and the outgoings?
- Do you have a written lease?
- Do you have any options to renew your lease?
- When does your lease/option expire?
- Have you provided a personal guarantee, bank guarantee, or a bond?
Risk Management
However well prepared you are things will go wrong at some stage in the lifespan of your business, and you need to be prepared:
- Do you have adequate and appropriate insurance for your business?
- Do you know what insurance policies you have?
- Do you know what risks they cover?
- Do you know where they are?
- Have you had the policies checked against the insurance requirements contained in any lease document?
- Where appropriate, have you noted the policy with third party interests?
Employment
Australia has strong workplace protections, and you need to be on top of your requirements as a business owner:
- Are your written employment agreements fit for purpose?
- Do you have policies/procedures for office-based and remote-working staff?
- Are the company officeholders covered by Worker’s Compensation?
- Do you self-insure for Worker’s Compensation risk?
Trade creditors
No business operates in a vacuum so you’re bound to need to deal with third parties – ensure your dealings with trade creditors are legally sound:
- Do you have up to date Terms of Trade that covers all contingencies?
- Do you have Director’s Guarantees on trade accounts?
- Do you request Director’s Guarantees from Debtors?
- Do you provide product warranties?
- Do you have standardised supply agreements?
Intellectual Property
So often overlooked, IP is your business’s most valuable asset. Make sure you can answer yes to all of these questions:
- Do you have trademarks, patents, design registration or copyright disclaimers?
- Have you secured your web name or URL?
- Do you own the copyright to the content of your website?
- Are your logos registered?
Don’t be afraid to ask for help if there’s any of these questions you’re unsure of – having a lawyer in your corner can go a long way to ensuring long-term success.
Simon Reid, CEO and Principal Lawyer, Arro Lawyers
