Thinking Of Starting A Business? Here's How To Legally Protect Yourself From Day One

Starting a business is an exciting venture, but it also comes with a significant number of legal requirements that must be addressed from day one. Failing to take the proper steps can expose you to risks such as personal liability, tax issues, and disputes that could undermine your business. In this guide, we’ll walk you through the crucial legal steps you should take to protect yourself and your business under Australian law.

1. Work with the Right Business Structure

Choosing the right business structure is one of the first and most important decisions you'll make. In Australia, you can operate your business as a sole trader, a partnership, a corporation, or a trust. Each structure has different legal implications:

• Sole Trader: As a sole trader, you’re personally liable for your business’s debts. This means that if the business faces financial difficulties, your personal assets (like your house or car) could be at risk.

  
  

• Partnership: If you choose a partnership, you and your business partner(s) share liability. This means that each partner is responsible for the debts and obligations of the business.

  
  

• Company (Limited Liability): A limited liability company protects your personal assets. As a director of the company, you won’t be personally liable for the company’s debts (except in cases of fraud or negligence).

  
  

• Trust: A trust is another legal structure in which a trustee holds assets on behalf of beneficiaries. This can be an option for business owners looking for additional protection, particularly in terms of asset protection and tax planning.

  
  

Each structure has its pros and cons, so it's important to choose one that fits your business model and risk tolerance.

2. Register Your Business

Once you've decided on your business structure, you’ll need to take several steps to ensure your business is legally registered:

• Australian Business Number (ABN): You must register for an ABN if you’re conducting business in Australia. An ABN is necessary for invoicing clients, dealing with suppliers, and meeting tax obligations. It also helps ensure that you comply with your tax reporting and payments.

  
  

• Register Your Business Name: If you're trading under a name other than your own, you’ll need to register that name with the Australian Securities and Investments Commission (ASIC). This helps protect your brand identity and prevents others from using the same or a similar name.

  
  

• Domain Name: If you're operating an online business, it’s essential to register a domain name that matches your business name. This allows you to build an online presence and strengthens your brand.

  
  

3. Understand Your Tax Obligations

Tax obligations are one of the most important aspects of business compliance in Australia. Here are some key tax considerations:

• Goods and Services Tax (GST): If your business’s turnover exceeds $75,000 annually, you’ll need to register for GST. This tax applies to most goods and services sold in Australia.

  
  

• Keep Financial Records: Accurate record-keeping is crucial for both tax and legal reasons. You must maintain proper financial documentation, including sales, expenses, and employee payments. This will help ensure that you meet your tax reporting and filing requirements.

  
  

• Consider Hiring an Accountant: An accountant can help you navigate tax obligations, maximise tax deductions, and ensure you’re compliant with Australian tax laws.

  
  

4. Protect Your Intellectual Property (IP)

Intellectual property (IP) is the lifeblood of many businesses. If you have unique products, services, or branding, it’s crucial to protect your IP:

• Trademarks: Register your business name, logo, and other identifying marks as trademarks to prevent others from using them.

  
  

• Patents: If you have a new invention, product design, or process, consider applying for a patent to protect your invention from being copied.

  
  

• Copyright: Copyright applies automatically to creative works like written content, artwork, or music, but registering your work with the Australian Copyright Council can offer additional protection.

  
  

5. Draft Legal Agreements

Legal agreements form the foundation of your business relationships. Whether it’s with suppliers, employees, or partners, it’s vital to have clear, written contracts that define the terms of your relationships. Important agreements include:

• Partnership or Shareholder Agreements: If you have business partners, these agreements outline each partner's role, responsibilities, and share of profits.

  
  

• Supplier and Client Contracts: These agreements define the terms of supply, payment, and dispute resolution.

  
  

• Employee Contracts: When hiring staff, it’s important to have clear agreements regarding roles, pay, hours, and other employment conditions.

  
  

6. Comply with Employment Laws

In Australia, the Fair Work Act 2009 governs employee rights. As an employer, you must comply with the following:

• Salary and Leave Entitlements: Ensure that employees are paid at least the minimum wage and entitled to leave (annual, personal, and parental leave).

  
  

• Superannuation: Employers are required to contribute a certain percentage of an employee’s salary to a superannuation fund for retirement savings.

  
  

• Workplace Rights: You must also ensure that the workplace is safe and that employees have fair access to work conditions and dispute resolution procedures.

  
  

7. Understand Consumer Laws

Under Australian Consumer Law (ACL), businesses must comply with various regulations aimed at protecting consumers:

• Deceptive Advertising: Avoid false or misleading advertising that could mislead consumers about your products or services.

  
  

• Product Safety: Ensure that products meet safety standards to avoid selling harmful or dangerous goods.

  
  

• Refunds and Guarantees: You must honour product warranties and guarantee refunds when products are faulty.

  
  

8. Obtain Necessary Licences and Permits

Before you start trading, check whether your business requires specific licences or permits. Examples include:

• Liquor Licences: If your business involves serving alcohol, you will need a liquor licence.

  
  

• Food Safety Permits: Restaurants, cafes, and food vendors need to comply with health regulations and obtain necessary permits.

  
  

• Building Permits: If your business involves construction or renovations, you may need approval from local councils.

  
  

9. Get the Right Insurance

Business insurance is essential to protect yourself and your business from unforeseen risks. Types of insurance you might need include:

• Public Liability Insurance: Covers your business against claims for injury or damage caused by your products, services, or operations.

  
  

• Professional Indemnity Insurance: For businesses that provide professional advice or services, this insurance covers legal costs if you’re sued for negligence.

  
  

• Workers' Compensation: If you employ staff, you’re legally required to have workers' compensation insurance to cover employees injured at work.

  
  

10. Safeguard Your Finances

Protecting your business finances is crucial to ensuring smooth operations:

• Separate Business and Personal Finances: Open a dedicated business bank account to keep personal and business finances separate.

  
  

• Limit Personal Liability: If your business is a corporation, ensure you limit your personal liability through the structure of your company. You can also add liability clauses to contracts to protect your personal assets.

  
  

11. Respect Privacy and Data Laws

If your business collects or handles customer data, you must comply with Privacy Act 1988. This includes:

• Data Protection: Implement strong cybersecurity measures to protect customer data.

  
  

• Customer Consent: Ensure that customers understand how their data will be used and obtain their consent before collecting personal information.

  
  

12. Seek Professional Advice

Starting and running a business requires expertise across various fields. To ensure you're legally protected, it’s advisable to engage:

• A Lawyer: A business lawyer can help you draft contracts, understand regulatory requirements, and protect your IP.

  
  

• An Accountant: An accountant can ensure you're meeting your tax obligations and offer advice on financial planning.

  
  

• A Business Advisor: A business advisor can help with strategic planning and growth, ensuring you’re on the right path to success.

By following these legal steps, you’ll be able to protect yourself, your assets, and your business from the very start. A well-structured, legally compliant business is less likely to face costly disputes and penalties, making it a crucial foundation for long-term success.