Legalities might not be the sexiest things to sort out when starting a new business, but getting yourself, your assets and your employees protected is about as important as a sprinter tying their shoelaces before shooting off the mark. So we called in Dominique Lamb, National Retail Association CEO and Director of NRA Legal, to help us. “I think sometimes people decide on a whim to open a business, or they’re constrained by funding,” she says. “In setting themselves up for success, sometimes they’re willing to sacrifice certain things – which we wouldn’t encourage them to do.”
Here are the areas Dominique does encourage business owners get a handle on, from day dot:
You’ll need to decide if you’ll be an ABN holder or a company. “Once you have a ACN [Australian Company Number], your business takes on a legal entity and becomes its own person… [and] there are ways to separate your personal assets from having a business. Sometimes family trusts or other forms of trusts – like discretionary trusts and things like that – can be quite good in terms of managing taxation and liability. It’s just really important to get advice from a really good financial adviser, or even a civil lawyer.” If you’re going into business with another person, Dominique also suggests setting up a partnership structure and agreement – even if you’re family or friends – to set out everyone’s rights and responsibilities.
According to Dominique, public liability insurance, professional indemnity insurance and workers’ compensation are “incredibly essential,” and companies should throw in director and officer insurance, too. “Get really sound advice from a financial adviser or a trusted accountant around what is the best structure for your assets and how to protect yourself and your family home.” Insurance around importing is costly, she says, but not something to skimp on. “A lot of businesses will sacrifice paying for insurance because they think it will be a one-off. However, if that one-off happens it’s going to be a significant cost to you, so I would say without a doubt, if you are importing, you need to see someone about what coverage you need.”
If you’ve got employees (or plan to have them down the track) you’ll need to establish what Dominique calls ‘compliance around employment’. “So, making sure you understand what awards you’re paying under and making sure you’ve got a suite of contracts that sets out your rights and responsibilities towards your employees and vice-versa.” Include your company’s stance on safety, discrimination, drugs and alcohol and a code of conduct on those employee contracts, too.
As trusting as you may be, do your due diligence here. “You’ve got to check that you have the right to hold [outside suppliers] liable for anything that you become liable for because of what they’ve done,” and take a good long look at their business. “Do they have employees? Are they paying them correctly under the Fair Work Act? Safety would be the other thing – making sure that if they’re performing work on your site that they’re covered by your insurances and that anyone you’re outsourcing to has the appropriate worker’s compensation insurance for those workers so that you don’t get hit with a claim if you’ve got them seconded onto your site.”
“If you have an idea that needs to be trademarked or copyrighted – that you need to protect in any way – it’s really important that you seek counsel from an intellectual property lawyer,” says Dominique. She points out that, while there are pro-bono intellectual property associations that can give you advice in this area, you shouldn’t go about trademarking on your own. “It can be quite complicated and you want to make sure you’ve got the full protection if you’ve got a really original idea,” she says. Secure both the dot-au and dot-com domain names for your business while you’re at it.
Want to avoid fines? Keep up to date with your VASS and tax statements. “I would recommend having a highly qualified bookkeeper, even if they’re part-time, to make sure that you’re on track, and also stay close to your accountant in relation to taxation,” says Dominique. “You really need to be clear, before you start out, about what receipts you need to keep, what can you claim, what can’t you claim, what you should be putting through your business, how to best structure any vehicles or any assets and things like that so that you can make sure that your balance sheet always looks as good as possible.”
Health and safety
Accidents happen, and in the business world they can incur hefty fines – even imprisonment. “It’s really important that you can show that you have done that safety assessment of your workplace, you’ve got the appropriate policies in place, you’ve got a reporting system in place and that you do everything in your power to minimise any risks that are identified. And it’s important that you get your employees to identify those to you as well, and that you act on anything that’s reported to you.”
Supplier and client contracts
Read them. Thoroughly. Especially the fine print. “If there’s anything that you don’t understand ask as many questions as possible and never be afraid to negotiate,” says Dominique. “If there’s something in that contract that doesn’t sit well or you’re being held liable for that you’re not comfortable with, go back to them and ask them to change it and see what happens. Negotiate with your contracts, don’t just enter into them.”
The privacy laws are tightening up around cyber security in Australia, so Dominique advises making absolutely sure you’ve got appropriate software protection on any computers that you’re using. “Knowing that you’ve got everything password protected where you need to and making sure that you have control over those is incredibly important,” she says. “If there’s a breach of your cyber security you’re going to have to report that, so it’s really important that you’re on top of it and that you can say, hand on heart, that you can protect your customers’ information as well as your business’s information.”
Ten per cent of Aussie businesses have waited a year or more to see payment from a client or supplier, so it’s little wonder this is major (albeit awkward) area to address. “You need to have processes around how you’re going to get paid from suppliers or from your customers and ensuring that it’s done in a short period of time to make sure that your cash flow is sustainable.”
This story is not intended to be comprehensive nor does it constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.
Want to learn more? Come to our Collective101 Protect Your Business masterclass on August 31. Book your tickets.