Starting a new business is an exciting endeavour, but it also comes with legal responsibilities. It's crucial to ensure that your startup is legally sound right from the start, as this can help you avoid significant issues and potential challenges in the future.
This guide presents essential legal tips for startups to assist in safeguarding your new venture. Overlooking legal requirements can result in costly lawsuits, fines, and even the dissolution of your business operation. By comprehensively addressing these legal aspects early on, you can protect your investment and concentrate on growth and innovation.
How to start a business
Selecting the proper business structure is one of the initial essential steps when beginning a business venture. This decision impacts your taxes, personal liability, and ability to raise capital. Here's an overview of the main business structures:
Choosing the right business structure
- Sole Proprietorship: This setup is straightforward and gives the owner complete control. Due to its minimal formalities, freelancers and small business owners often prefer this type of business structure.
- Partnership: A partnership is created when two or more individuals decide to share ownership of a business. General partnerships mean all partners are responsible for running the business and share liability. Limited partnerships mean certain partners contribute financially but do not participate in day-to-day management.
- Limited Liability Company (LLC): An LLC combines the benefits of a corporation with those of a sole proprietorship or partnership. The individuals who own an LLC are not personally responsible for the company's debts beyond their investment in the business.
- Corporation: A corporation offers the highest protection from personal liability. It can raise funds by selling stocks and is liable for corporate taxes. There are various types of corporations, including C and S corporations, each with unique tax and regulatory consequences.
Registering your business
1. Register for an Australian Business Number (ABN): Apply online via the Australian Business Register (ABR).
2. Register your business name: Ensure it's unique and not already in use. Sign up through the Australian Securities and Investments Commission (ASIC).
3. Apply for necessary licenses and permits: Use the Australian Business Licence and Information Service (ABLIS) to find requirements.
4. Register for Goods and Services Tax (GST): Register through the Australian Taxation Office (ATO). This is mandatory if the annual turnover exceeds $75,000.
It's important to carefully consider your business structure and diligently complete the registration processes. These steps are crucial in establishing a strong foundation for your business.
Intellectual property for startups
To safeguard their innovative ideas, entrepreneurs must prioritise the protection of their intellectual property (IP). Any new business must have a good grasp of trademarks, patents, and copyrights to secure its assets and prevent unauthorised use.
Trademarks
The trademark registration process:
- Identify a unique trademark: Make sure the name, logo, or slogan you want to trademark is unique. You can check for existing trademarks that clash with yours by searching the Australia Official Journal of Trade Marks database.
- File the application: Apply online through the IP Australia website. Include a detailed description of the trademark.
- Publication and opposition: IP Australia reviews the application to ensure it follows the rules.
- Registration: If no challenges are raised, the trademark will be officially registered, giving the owner exclusive rights. You will receive a certificate of registration, valid for ten years, with the option to renew indefinitely.
Patents
How to file for a patent:
- Determine patentability: Ensure you conduct a comprehensive search to confirm the invention is original.
- Prepare a patent application: Make a comprehensive record of the invention by providing detailed descriptions, claims, and drawings.
- File the application: Apply online through IP Australia's eServices portal or by mail.
- Prosecution: Respond to USPTO inquiries and objections during the examination process.
- Grant and maintenance: If approved, maintain the patent by paying periodic maintenance fees.
Copyrights
Protecting your creative works:
- Definition: Copyrights safeguard original creations like books, music, and art from being used without permission.
- Automatic protection: Copyright protection is granted automatically once a work is created and recorded in a tangible form.
- Duration: Generally, copyrights last for the author's life plus 70 years.
- Exclusive rights: The creator can reproduce, publish, perform, communicate, and adapt their work.
- Enforcement: Protect your copyrights by using takedown notices, legal action, and licensing agreements to enforce them.
New businesses need to grasp and handle intellectual property (IP) effectively to safeguard their innovations and original creations within the bounds of the law.
Employment laws for small businesses
Understanding the key elements of employment laws can help maintain a compliant and productive workplace. This section covers employee rights and employer obligations, providing a clear framework for effectively managing employment relationships.
Employee rights and employer obligations
- Minimum wage: The Fair Work Commission determines the national minimum wage, which is reviewed annually. As of July 1, 2023, it stands at $23.23 per hour.
- Overtime pay: Extra overtime pay is usually 1.5 times the regular rate for the first three hours worked and then double the regular rate afterward. The exact overtime rates may differ depending on awards and agreements.
- Employee benefits: Employees are eligible for mandatory benefits, such as a contribution of 11% of their regular earnings towards their retirement savings. They are also entitled to four weeks of paid annual leave per year and personal/carer’s, parental, and public holidays.
Creating employment contracts: Essential clauses to include
- Job description: Clearly describe the duties, responsibilities, and reporting structure.
- Compensation: Provide information regarding salary, hourly wage, commission structure, or bonuses. This should also include details about pay frequency and the method of payment.
- Working hours: Outline the regular work hours and the rules regarding working extra hours. Specify the expectations for being present at work and taking breaks.
- Termination conditions: Detail the process for voluntary and involuntary termination, which should encompass notice periods, severance pay, and the grounds for immediate dismissal.
Understanding and implementing these aspects of employment law can help small businesses foster fair and lawful workplace practices. By staying informed and proactive, employers can mitigate risks and create a positive environment for their employees.
How to protect your startup legally
Ensuring your startup is legally protected for long-term success is essential. Getting the right insurance and following regulations are crucial to safeguard your business from legal issues. Here are the key points to consider:
Types of insurance:
- General liability insurance: This protects third-party claims for injuries, property damage, and harm caused by advertising.
- Professional liability insurance: This provides coverage for claims related to negligence or malpractice.
- Product liability insurance: Protects from cover claims associated with product flaws that result in harm or injury.
Common legal mistakes startups make:
- Inadequate documentation: Lack of contracts, agreements, and proper record-keeping.
- Ignoring IP rights: Failing to protect intellectual property like trademarks, patents, and copyrights.
- Non-compliance: Overlooking regulatory requirements and industry standards.
Proactive measures to stay compliant:
- Regular audits: Regularly check that you follow all legal and regulatory requirements.
- Legal counsel: Connect with legal experts for continuous guidance and assistance on matters required by the law.
- Training: Ensure all employees are well-informed about compliance, data protection, and company policies.
Focus on these aspects to strengthen your startup's legal framework. This will help protect your business activities from potential risks and set it up for long-term success.
When dealing with legal matters, it's important to pay close attention to details and understand your rights and legal obligations. This involves grasping contract terms, acknowledging intellectual property rights, and adhering to relevant regulations.
It's advisable to seek personalised legal guidance tailored to your circumstances. By staying proactive and well-informed, you can safeguard your interests and effectively pursue your objectives.
