It’s always an exciting ‘adventure’ to set up a new business, however, it’s equally stressful and demanding. What with trying to attract new customers and screening for competent employees, there’s just so many things that new businesses need to survive. The Australian Bureau of Statistics has it that more than 60% of small businesses close shop within their first three years of operation. In this informational article, you’re going to learn about the three legal necessities for any small business start-up.
Your business structure
No matter the type of business, whether it’s a sole trader or a partnership, there should be a distinctive structure for the business. This is why it’s of utmost importance that you understand the differences between various business structures and their tax obligations.
The simplest form of business structure is the sole trader. This type of business only allows you to register your business name and enter contracts in your name. Running as a sole trader business means being in total control of business decisions without any outside interference. However, you don’t have limited liability, which means that your personal assets would be at risk if you were to default on loans or fail to meet debt obligations.
Partnership is another form of business structure. In this type of structure, all contracts are in the names of the partners of the business. Profit and losses are divided equally between the partners according to their ratio of contribution to the business. The individual partners assume debts/liability jointly.
More so, you still have the option of operating your business through a discretionary family trust. In the case of a trust, contracts are entered, and contracts conducted in the name of the trustee, which is oftentimes a corporate entity. As the business owner, you could be the director of this corporate entity. All the income generated by the business can be shared to some or all of the beneficiaries, whom will take charge of any tax implications.
There’s no doubt that as your business continues to grow, there will be the need for more employees to assist with the operation of the business. It’s important that you get every hired employee to sign an employment agreement. This should be drafted separately for each of the employees. This legal document is important because in it, you will set out leave entitlements and superannuation, as well as other clauses that will help protect your business such as your confidential information and intellectual property.
Did you register a trademark?
A lot of business owners think that only registering a domain name or business name will deter others from using their business name – this is mostly incorrect thinking. Someone else can still use your business name and logo unless you register it as a trademark with 1P Australia – an Australian Government agency given the responsibility of registering and administering IP rights. A trademark is what identifies and distinguishes your products and/or services. Others can challenge it if they believe you’re not the rightful owner. It will be somewhat difficult for you to stop others from using your business name if it’s not trademarked.
This article has laid out three necessities every business must have. If your business doesn’t have any of them, then it’s time to throw them on your to do list and get started.
If you’re looking for a quick and simple loan solution to get yourself set-up with some extra funds to tackle the legal basics, talk to Unsecured Finance Australia about how we can help you meet your business finance needs.