Legal for start-ups: Cutting through the red tape

By Leon Gettler

Setting up your own business can be a daunting prospect and going through a stack of legal processes is no exception. Unfortunately in the rush to go to market, many business owners forget to tick off some crucial legal basics. Here are a few must-dos.

Get the legal structure right

There are four main types of business structures commonly used in Australia. They include:

  1. Sole trader: an individual trading on their own.

  2. Partnership: an association of people or entities running a business together, but not as a company.

  3. Trust: an entity that holds property or income for the benefit of others.

  4. Company: a legal entity separate to its shareholders.

The structure you choose will determine the licenses you need to operate, as well as your legal requirements. It determines the type and amount of records and accounts you will need to keep, and whether you will be personally liable if your business runs into financial difficulties.

Small-business owners typically start out as sole traders or in a partnership before the business is formally incorporated as a limited liability company or limited liability partnership. If the business is a partnership, you will need a partnership agreement setting out the rules of how the partnership operates (for example, how much profit each partner is entitled to).

You also need to be across all the regulatory and compliance issues relevant to your business type.

To find out more about which structure best suits you - and learn the legal obligations of each - visit the Australian Securities & Investments Commission.

Remember to check the basics

It's important to be mindful of legal requirements, even before you start trading. Be sure to:

  • Check your business name doesn't already exist or closely resemble an existing business and that it doesn't infringe on any trademarks.
  • Assess whether you require an Australian Business Number (ABN).
  • Consider if you need to register for GST.
  • Check if you need a license or permit to conduct the business you are proposing.
  • Look into issues such as leasing, trading terms, privacy and copyright concerns.

Sort out the details of client agreeements

Specialists say it's particularly important not to start doing any business until you've agreed on things such as:

  • Payment schedules.
  • The scope of work and who owns the intellectual property (IP). (Indeed, intellectual property is another area that shouldn't be neglected, particularly if you are dealing with contractors who own the IP.)
  • Licensing and confidentiality agreements.
  • Trademark registration for new brands, product names, logos, tag lines or slogans.

Where to find out more

The Australian Government provides a comprehensive legal guide for start-ups covering business structure, banks and financial institutions, business failure, business relationships, credit and debt recovery, dispute resolution procedures, employment issues, fair trading, insurance, liability, planning and environment, and privacy. Check it out, it's pretty comprehensive. And of course it never hurts to get some legal advice from a professional.

It may seem like a lot to get your head around, but don't be intimidated by what you need to pick up legally. Even before you see a lawyer, the information is out there.

*This article contains general information and commentary only, and is not legal or financial advice, and you agree not to rely upon this article in any way.


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