When starting any kind of business, there are key legal considerations that cannot be ignored. Reaching a basic understanding of your legal rights and obligations is essential to building a healthy, successful business, and if the legal requirements of your industry are significant you may find huge value in hiring a legal expert to help.
What are the main legal considerations when starting a new business?
- How am I going to structure my business? From day one, business owners must make important legal decisions that may have ramifications down the line. The first is how they structure their business. Some businesses are safe to operate under nothing more than an ABN, but if you have valuable assets, business partners or significant risk exposure you may need extra protection through a trust or corporate entity.
- Do I know the regulatory and compliance requirements for my industry? Many industries have mandatory reporting, special licenses and permits and other regulations to protect consumers and ensure good business practices. It is essential that any new business owner researches their particular industry thoroughly or engages a qualified legal professional who is experienced in their area.
- If my business fails, do I know how to handle insolvency? The unfortunate reality is that many businesses fail, but good business founders have contingency plans in the event they cannot pay their existing debts. It is good practice to come to a solid understanding of insolvency law and what your options are if your business cannot meet its obligations, but if you are currently unable to pay your debts it is essential you seek immediate legal advice.
- If I come into conflict with another party, how will I resolve the dispute? Many companies these days favour mediation and other alternative dispute resolution techniques, as they save on court costs and legal fees. Regardless, establishing a relationship with a lawyer who specialises in litigation and dispute resolution will give you a strong ally to go to if you run into a legal conflict.
- Do I have any intellectual property, and have I protected it? Intellectual property includes an invention, a trademark, a design, a brand or even the application of an idea - the main requirement is that it be something new and original, which you hold claim to. Due to the complexity and importance of the process, business founders without a legal background are strongly advised to engage an intellectual property lawyer to advise and assist them.
- Do I understand the competition, consumer and trade practices I am expected to conform to? There is a body of law which governs the practices of businesses in relation to their competitors, suppliers and consumers. The purpose of this law is to protect, enhance and extend competition by preventing dishonest and predatory business practices. For example, business owners are not allowed to enter agreements with competitors to reduce competition, nor are they allowed to form ‘cartels’ to control pricing or manipulate consumers. Before entering any contractual agreements with other companies, it is wise to seek legal advice to ensure the contract is legal and enforceable.
- Will I be hiring staff, and do I understand the relevant employment law? Hiring staff comes with a number of legal obligations, such as paying superannuation, seeking extra insurances, paying payroll taxes and reporting income information to the ATO. If you are seeking to start a business which employs other people, whether as staff or contractors, it is wise to seek legal advice on how to structure your processes to meet your obligations.
- Do I understand the process of buying and selling businesses, should I choose to exit my business? For some entrepreneurs, selling their business is the ultimate goal. Other’s seek to avoid the risky startup phase by buying a proven business. Understanding the process and doing your due diligence is essential for the parties on both sides of the table, and seeking legal advice prior to buying or selling a business is essential.