Top 6 legal considerations for a start-up business

Legal considerations for small business

Top 6 legal considerations for a start-up business

Starting a business is exciting!  It is, however, important to comply with all necessary legal requirements to ensure your business is adequately protected from the outset.

Due to a lack of experience, knowledge and resources, start-up business founders tend to overlook the following top 6 legal considerations.

Consideration 1

Choosing the right structure for your start-up business

Choosing the right structure for your start-up business is one of the most important decisions you will make as a new business owner.  The business structure you choose to operate under will affect your level of personal liability, the amount of tax you pay, your control over the operations of the business, and your growth potential.  Bearing in mind there are advantages and disadvantages to each structure.

Business structure types in Australia

The most common legal structures for business are:

Consideration 2

Shareholder/partnership Agreement

If you set up your company with co-founders, you will need a shareholders’ agreement.  A shareholders’ agreement will cover important considerations such as:

  • What decisions directors and shareholders can make
  • How often directors and shareholders will meet
  • The sale of shares
  • How dividends will be paid
  • Selling the company
  • Dispute resolution

A good shareholders’ agreement will have a Deed of Accession.  This deed is signed by the company and the new shareholder rather than having each shareholder re-sign the shareholder agreement.

If you develop your start-up business with a partner, you will need a partnership agreement.  A partnership agreement will clearly set out the role of each business partner, the management of company profits and terms for ending the partnership or winding up the business.

Shareholder Agreements
Consideration 3

Employee/independent contractor agreement

In order for your business to grow and succeed, you will need to hire employees and/or contractors.

Employees are covered by national and state based legislation including the Fair Work Act.  Employees are entitled to (amongst others things) minimum wages, sick leave, annual leave and superannuation.

Contractors are independent and run their own business.  In general, you are not required to pay their insurance, superannuation or PAYG tax.

Employee and independent contractor agreement

You need to correctly assess whether the worker is an employee or contractor as each has different rights and entitlements.  If you get this wrong, you may be legally and financially liable.

Once correctly assessed, you need to document the relationship using either an employment or independent contractor agreement.  Regardless of the agreement, it will cover (amongst other things) the worker’s role, remuneration, entitlements and employee obligations.

Employee Agreements
Consideration 4

Terms and conditions

Most start-ups have an online presence, for which your business is liable.  Hence, it is vital to nail your terms and conditions.

If you have a website, you need website terms of use.  These terms, which are between you and visitors to your site, reduce your liability and inform visitors about acceptable behaviour of use.

If you sell products or services, you need business terms and conditions.  As well as addressing consumer law requirements, business terms establish the basis on which you will provide your products or services to a client.

Terms and conditions for business website

If you have an online marketplace, you need marketplace terms and conditions.  These terms are complex to draft, as they address the rights and obligations of all users interacting in the marketplace i.e. buyer, seller and marketplace owner.

Terms & Conditions Services
Consideration 5

Privacy policy

Your business needs a privacy policy if it intends to collect personal information from its clients.  The purpose of a privacy policy is to show clients how you will use their personal information.  A privacy policy that is compliant with the Privacy Act will address the following.

  • The type of information you will collect.
  • How this information will be used.
  • If this information will be disclosed to third parties and, if so, to whom.
  • Whether this information will be stored and, if so, where.
Terms and conditions for business website

If you email promotional material to your clients, you need to disclose this in your privacy policy.  In doing so, you will comply with the Spam Act.

Consideration 6

Protect your IP

Your IP is your most valuable asset and you must protect it.  

The most common types of IP include:

Are you starting a business?

Starting a business is exciting but it is important to comply with all necessary legal requirements to ensure your business is adequately protected from the outset. If you’re thinking about starting a business and would like to discuss any of the above. We would be happy to assist you.

1300 149 140 Contact us

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