If you are starting out, you likely have a great new idea, or are keen to branch out on your own. Perhaps you are switching careers and want to work for yourself, or are excited by the new franchise opportunity.
Before diving in, it is important to take the time to map out your legal plan as part of your business strategy. It may not sound as much fun as working on product development, but doing it properly upfront can avoid some nasty surprises later.
Choosing a business name and branding
You can choose to set up business in your own name or register a business name with ASIC. Before deciding on the name, you should consider whether a suitable web address is available, or even a phone number where the numbers match the letters of your name on a phone (2=ABC).
Before spending money on preparing your promotional material, make sure you are able to use the name and branding you want to. It might be the case that someone as beaten you to it and already has the name or logo you were thinking of, or something sufficiently similar you would be breaching their intellectual property. You should also consider protecting your own brand through registering your trademark and if relevant your design or patent.
Do I need a company or trust?
You can start a business in your own name (called a sole proprietor). If you are establishing it with someone else you may decide to create a Partnership. There are specific laws that apply to Partnerships so you need to ensure they are applicable to how you want to operate, however in most cases you will want to have a signed Partnership Agreement so everyone knows where they stand.
Most business operate through a company and in some cases through multiple companies with different companies taking on different roles within in the corporate group. It is important to get advice about your long term objectives as changing the structure later can be complex and may have tax consequences.
Many family businesses have a trust that sits behind the corporate entity and ultimately own the business for the benefit of certain beneficiaries (usually family members).
Choosing the best structure requires careful thinking and some forward planning, particularly if the owners may split at some point in the future (retire at different ages), or want to be able to list or spin off part of the business.
If you are operating a company with more than one owner you need to think about remuneration to be paid and when dividends will be paid. A useful document is a Shareholders Agreement which can set these things out as well as issues such as rules around the operation of the business, whether certain decisions are required to be unanimous, delegation of authority, whether there are shareholder loan accounts and what happens if one wants to sell out and if so how the price is determined.
While it costs time and money to work through these details upfront, it may avoid a Supreme Court proceeding down the track when things don’t go as planned.
While most new business are focused around where they want to be located and what it will cost, you also need to think about what happens if you need to leave (hopefully to a larger site), or how to protect your rights to stay if you have built up goodwill by being in a particular location which is convenient to your customers.
If you are leasing premises, it is important that you understand your rights and negotiate the best possible terms to suit your objectives. You might think of it as an industrial site, but it may still be a retail lease.
Contracts and the list goes on……
Then you need to think about what terms you are going to trade on including how long are you going to give your customers to pay and if selling goods, whether you are going to register your security interest.
There is a lot to think about and we have only skimmed across the top of the iceberg, so you need advice get in touch and we can guide you through the issues.
Business + Property Lawyers