What business structure to follow
In the beginning, you will need some structural advice to start with. Either start out as a sole trader or incorporate straight away.
If there is more than one owner, you will need to obtain some advice in relation to either a partnership structure or shareholders of an incorporated proprietary limited company (Pty Ltd), director’s duties, fiduciary duties to shareholders, potentially a trust structure.
In consultation with financial advice, the business vehicle should be chosen carefully to ensure that it is the right one for the medium-long term.
Getting industry specific advice
Prior to commencement, you will also need some industry specific advice.
Some high-level advice about the particular industry you are going to be trading in and generally what you need to watch out for in terms of “big-ticket” items.
Getting a scope of what legal work needs to be done to protect you prior to trading is essential.
Obtaining business insurance
Business insurance is something that small businesses generally do not consider enough when starting a business. Just like travel insurance, it is highly advisable to have insurance in place just in case something happens.
There is a raft of insurance providers and brokers that can help obtain the right insurance cover for your particular business and operations. As all businesses are different, they generally need different cover.
Some advice in relation to cover is also recommended as there is a lot of fine print in insurance contracts and barely anyone reads them.
Don’t forget, Workers Compensation insurance is mandatory if employing staff in Australia.
Creating Terms & Conditions, Disclaimer/Waivers and Privacy Policies
Terms & Conditions:
Ideally before you start to trade (or immediately after), you also need to get some advice about how you are going to legally transact with your customers or clients.
If a business does not have terms and conditions with its client, it runs the risk of a complaint and a tribunal will, in most cases decide against a business in the absence of clear terms and conditions (in the absence of any other clear disclosure). The onus falls on a business to ensure that all its contracts are clear and unambiguous.
Disclaimers and waivers should be drafted and either presented or acknowledged in certain circumstances prior to engagement of services. These are for example, those “big-ticket” items such as “by using this service, you agree and warrant that….in no way is this to be taken as …. and you agree and acknowledge that you will not hold us responsible for….and agree that you will rely on your own enquiries etc”. By signing a waiver form, the customer/client hereby waives all rights in relation to….and agrees… etc.
They are really important “in flashing lights” few sentences to make it abundantly clear so that if the matter were ever to come before a Court, then you as the business owner can say that it was specifically made aware and not buried in terms and conditions. i.e. there is no way they can say that they weren’t aware of it and even signed.
Good examples might be for extreme sports like skiing, sale of various products, or for business to business services like coaching. They are extremely useful when worded correctly to reduce risk and liability.
Privacy policies are now becoming mandatory if you’re collecting personal information through your website. It has to tick a whole host of boxes of what is required to disclose to people visiting your website or using your services.
All the above should be done before engaging with your first client/customer.
Entering into agreements with 3rd parties
If there is any consequences of a breach of supply or agreement with any business that is contracted to provide services, the agreement should be made clear and in writing. It should be legally drafted and reviewed prior to execution.
The number of disputes that small businesses get into as a result of a hand-shake arrangement is staggering. Any misunderstandings as a result of not having clear agreement on all important matters is likely to lead to disagreement or dispute.
Having these agreements in writing is good business to ensure smooth delivery and continuity of the businesses services. You can imagine the consequences of a disruption and/or a costly dispute. It’s just not worth the risk.
Registering Trade Marks and other Intellectual Property
A business should make sure that the name they choose for their business name is available and not already registered as a business name, trade mark, or currently used in the market. A business name search, an Australian Securities and Investments Commission (ASIC) search and an ATMOSS search on the IP Australia website. Some general advice about trade marks of names, logos and tag-lines, any designs which you wish to register and any copyright advice.
If your business has a new and inventive idea which you would like some advice on potentially applying to register a patent, now is the time to get that preliminary advice. Potentially also considering a government grant if available for the process.
Non-disclosure agreements are also commonly used to protect disclosure of ideas and prevent unauthorised use or wider dissemination.
Taking on staff members in the workplace
As soon as you are thinking about hiring your first staff members, you will need some advice about the classification of staff either casual, part-time, permanent part-time, full-time employees, or independent contractors. Making sure that the right wage, awards etc. are considered and applied, and that the workplace contract is legally valid is vital.
The difference between independent contractors and employees is something that constantly comes up and you need to be very careful in this regard. The Australian Tax Office has a guide on their website to assist you but we find a few Australian businesses get into hot water here.
Workers’ Compensation insurance is also needed here if you’re employing staff.
Dealing with debtor management & dispute resolution
Sooner or later as the business grows, it is inevitable that a business will have some issues collecting debts for work done and not paid for some reason.
Most of the time, it’s not the fault of the business itself – there are simply those that refuse to pay for services rendered. However sometimes, there’s a bit of blame on both sides.
Regardless, the debtor refuses to pay and legal advice is a good idea about what method is best legally to recover the debt.
You may also find yourself embroiled in a commercial dispute and potentially, court proceedings either brought against another party or being the defendant/respondent in a legal court action.