Do not fail to plan your structure.
A business can be conducted in many forms, such as an individual sole trader, individuals in partnership, a company, a trust, a SMSF or a combination of both. The entity which operates your business can have an impact on your personal risk profile and can have accounting and taxation consequences, such as stamp duty, CGT, the ability to carry over losses and the ability to distribute profits.
Whilst it is important to have faith in the viability of your business idea, it is also prudent to take steps to minimise your personal risk. Having an appropriate structure in place can assist in reducing your personal liability in the event that the business fails. You should obtain accounting and legal advice in relation to the structure of your business and should review that structure every 2 years to ensure that you have the best foundation for your business.
Do not forget to protect your IP
Your business name, the logo you use and any copyright in your works are, amongst other things, intellectual property of your business and should be protected like you protect any other asset. They should be registered where possible, and if your business structure has been set up to quarantine these assets in a separate holding entity, your business should have a written legal right to use that IP. This process can be one of the more confusing establishment processes, so you should speak with your Lawyer to ensure that your IP is being adequately protected.
Do not rely on verbal agreements.
Verbal agreements can be legally binding, but enforcing them is a lot more difficult than enforcing a written agreement. Most contracts should be in writing, even if it is not a legal requirement. Written agreements provide for less risk for your business, because you have a document that clearly sets out each party’s rights and obligations in case of confusion or later disagreement.
Do not overcomplicate things
When putting in place written agreements, it doesn’t have to be written in a complicated, legalistic document full of double negatives and confusing sentence structures. Good agreements keep it simple. They create short, clear clauses which deal succinctly with one right or obligation at a time. This helps reduce the confusion and provides clarity and certainty to the terms of the agreements.
Do not assume confidentiality from other parties
There are many instances where you may be required to share confidential or proprietary information with another party, whether that be a prospective buyer or investor, business partner or another entity in the manufacturing or supply chain. Doing so without protecting your information from being stolen or used without your consent can be very costly and may destroy your business. Prudent businesses should obtain written agreement that the party receiving the confidential information holds that information in strict confidence and will only use it for purposes approved by you. The agreement should set out the recipient’s obligations, the limitations on use and your right to damages and injunctive relief should the receiving party breach the terms of the agreement.
Do not believe that all of the owners have the same interests
Operating a business where there is more than one owner can be complicated. Different people have different motivations and different interest which do not always align. Therefore it is prudent to have an agreement behind the scenes with your other business owners to ensure that each party gives their best endeavours to the business and that any disputes can be handled in a way which does not cause disruption to the operations of the business.
Do not think you can do it all
You are in business because you have a passion for what you do. You may have a great product design, or provide a service in a way no one else can. However, that doesn’t automatically make you great at running and operating a business. Adopting a proactive rather than reactive stance to structuring your business will provide with you with certainty so that you can focus on developing your products or services with peace of mind. Lawyers can provide advice on a number of aspects of your business, and do so on a daily basis to a large number of clients and can assist you in your business.
Do not stick your head in the sand
Operating a business can be a stressful and emotional career, and there are times where it may not be going all your way. Particularly where demands or proceedings have been commenced again you, it is important that you act swiftly and obtain timely advice. Many legal proceedings or claims by the ATO have strict time requirements, and therefore burying your head in the sand, and pretending that it isn’t happening is only going to make things worse. Speak with your Lawyer as soon as a dispute or claim is made, and give yourself enough time to obtain and act on quality legal advice.
At Stone Group Lawyers we have a team of highly experienced commercial and corporate lawyers who will help you navigate through what can be a very confusing and complicated process. We will endeavour to provide you with the best and most cost effective legal services taking into consideration your desired result. Contact our office on (07) 5635 0180 for a free 30 minute consultation with one of our lawyers.