One of the most common questions I am asked is what the main legal issues are facing businesses, particularly those in the small and medium-sized enterprise (SME) category?
Well, there is really no one size that fits all answer. It really depends very much on the industry or professional sector that the business operates in, but there are certain issues that all businesses will face either during their start-up phase, as they grow or even when they are successfully operating.
Know your market
People often say this is the most important aspect at the outset, but it is equally important to continue to know and understand your market as your business evolves and grows.
However, saying this is one thing, but really understanding it is the key to success and will inevitably give you a competitive edge.
The market encompasses your clients, customers, suppliers and importantly your competitors. You must know what they want, what they need and how you can deliver. Most importantly you must know how to reach and engage with them.
A business and strategic plan is vital. You must do the research, seek out and take advice.
You may have a wonderful product or be a very talented professional but don’t ever hesitate to be open to continue learning and seeking assistance.
Your professional advisors should be an integral part of your journey including your lawyer and accountant.
Get the business structure right
This is crucial when starting a business and should be constantly reviewed throughout your journey of success.
There are a range of structures you can use including sole traders, partnerships, corporate entities and trusts.
Each one of these structures have their own unique tax and legal issues, so take advice from your trusted advisors.
When your business changes or pivots you need to review your structures. I encourage clients to include in their annual planning and strategic review how their structure is performing and do any changes need to be made either at the time or in the future.
Documentation – Agreements and Contracts
Make sure you have the right documentation in place to support your business.
We live in a very regulated business environment and you must ensure all your documentation is compliant and reflects your understanding of your relationships.
It is a mistake to underestimate the importance of this.
Some of the most unpleasant and protected disputes I have seen in the business sector have been in part due to poorly drafted or “off the shelf” documents.
In this ever-changing digital world, it is important to ensure your marketing tools and supporting documentation including your website, blogs, facebook pages etc are compliant with all the relevant consumer laws which are continually evolving and changing.
I often see the temptation by businesses to employ people on a casual basis or as a contractor. You must be aware this can lead to significant issues down the track.
It is important a business understands its employment obligations including awards, superannuation, fair work, workplace health and safety etc.
Make sure you have well drafted and clear contracts in place and get expert advice if you are in any doubt.
In most industries you will be required to have license or multiple licences to lawfully operate and conduct your business affairs.
These licences may require the business to comply with certain regulatory regimes whether at a local, state, federal or even international level.
The licence can be granted by your local government authority, the state, federal commonwealth government. They may also be administered by a professional or regulatory body.
The purpose of a licence is often to confirm to the consumer that you have the relevant training and expertise to sell a product, service or give advice.
It may also confirm that you comply with such matters as health or hygiene requirements.
Most government authorities have comprehensive guidelines that are readily available outlining they type of licence you will require to operate your business and how to apply.
Don’t ignore your obligations regarding licencing. Fines can be substantial and even involve criminal sanctions where you could be sent to jail.
I have seen some businesses where the litigation and fines surrounding breaches of licence obligations can lead to catastrophic outcomes and even closing the business down.
Consumers and clients are very well educated so don’t risk your reputation or sanctions by not having the relevant licenses in place.
Protection of intellectual property
One of the most valuable assets of any business is its intellectual property.
It is often how your customers and clients relate to you.
It can be protected in a number of ways whether through getting it registered or keeping it confidential.
The various types of registration such as trade marks, designs, patents etc can be done in Australia and also worldwide.
Protecting this vital asset is something I emphasise to all my clients.
I can’t stress enough that even as the business keeps innovating and evolving, it needs to ensure that the protection continues with new products, ideas etc.
Director and business owner liability and regulatory compliance
The amount of regulatory compliance for business owners and directors is complex and continuing to increase.
It is not just legal compliance, but there is also financial compliance which has to be dealt with.
Often business owners and directors don’t have the time to undertake training to understand their obligations.
If that is the case in your business make sure your advisors including your lawyers and accountants keep you up to date and regularly review your obligations with you.
Raising capital and funds
Raising capital (also known as capital raising) is often crucial to start, grow and scale a business.
There are a range of models on how to do this and you need to give significant thought as to what best suits your business.
This is a very complex area and the level of documentation and obligations a business owner or director has to comply with in their role and also individually can be significant and have consequences personally.
Whether you are raising capital through a bank, alternative financial institution, a public offering or private raising you have to understand your legal rights and the consequences of not being able to repay those monies both for the business and you as an individual.
The shareholders agreement or business pre-nup
Whether you are a start-up, a growing business or a well-established one a shareholder, securityholder, unitholder, partnership or similar type of agreement is a must.
The nature of the actual agreement will depend on your business structure.
It is like your prenup for business and it is a legally binding document.
It governs the relationship between the owners and specifies who controls the business, the ownership, the management and how to enter and exit the business.
The issues that should be considered include:
- How much do you want to give away and why?
- What will the various powers of the parties be – e.g., can they vote?
- How to exit someone if they are causing issues or don’t deliver?
- What happens in case of death, illness or incapacity?
- How are disagreements and deadlocks resolved?
- Will there be provision to restrain a party if they leave?
The above points are just a small sample of what needs to be considered.
This is a very important document and will be relied upon by your legal advisors when there is a breakdown.
Cyber security, privacy, your digital presence and your consumer obligations
These are all new and emerging issues which all businesses are encountering.
Recently the ACCC in a report made recommendations affecting competition, consumer, media, copyright and privacy regulation in Australia and recommended introducing higher penalties for breach of privacy to bring it into line with line with penalties for Australian Consumer Law.
These are areas a business cannot ignore and have to take seriously.
In our digital world the obligations to customers, clients and stakeholders will expose businesses to significant risk and your lawyer can assist you with understanding and minimising these.
How can FC Lawyers assist with your business legal issues?
At FC Lawyers we have an expert team with many years of experience advising businesses whether small or big on these issues together with a range of other business and corporate services.
Contact our team to discuss your business legal issues.
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