A solicitor can help give a new business a strong foundation, can assist you in avoiding pitfalls or risks associated with buying an existing business and, once your business is established, can help you with ongoing transactions and ensure your business operates in accordance with changes to the law.
Starting a new business can be a daunting operation. Solid planning can reduce the chance that a new business will fail. This involves developing a thorough understanding of the many legal issues facing small business operators and the legal requirements that must be met. It is at this early planning stage that solicitors can provide critical advice that will help business operators minimise their legal risks.
For example, one of the first things that a new business operator must decide is whether they want to operate their business as a sole trader, a partnership or a company. Each type of business structure involves different risks and obligations.
Frequently business operators choose to establish a company. At law, a company or corporation is a separate legal entity or person. It can enter into agreements in its own name. This generally means that the business owner is not personally liable for fulfilling the company’s contractual obligations as would be the case with a sole trader.
However, frequently the contracting party may seek a personal guarantee from the company’s owner in the event that the company is unable to meet its obligations under the contract. This is often the case with leases and significantly erodes the benefit of incorporation.
Other times, business operators may choose to operate their business as a partnership. A partnership is a relationship or association between two or more persons with a view to profit. The persons may be individuals or companies. Partnerships are not incorporated. The rights of the partnership are determined by state legislation and also by a partnership agreement. It is preferable for partnership agreements to be in writing and a solicitor can assist in drawing up an agreement or providing advice regarding issues to be covered by the agreement.
Occasionally people interested in starting a small business may consider becoming a franchisee. Franchisees are given some protection by the Franchising Code of Conduct which requires franchisors to disclose specific information to franchisees and to follow special rules in their dealings with franchisees. Acquiring a franchise allows a new business operator to obtain the benefit of an established business name. However, it also typically requires making a significant financial investment, and it is important to have all relevant facts before entering into a franchise agreement.
New or existing business operators may consider buying an existing business. A solicitor can help analyse the advantages and disadvantages. If an existing business has a good business history, purchasing that business can increase the likelihood of a successful operation with the result that it may be easier to obtain financing. However, it can also be easy to overestimate the value of a business’ goodwill. There are many factors to consider when purchasing a business, such as the vendor’s reason for selling the business, sales patterns, customer base, current suppliers, staffing costs, profitability and outstanding debts. A solicitor can assist with may elements of the transaction, including identifying and checking all assets (including intellectual property and leasing arrangements), tax implications (including GST, capital gains tax and stamp duty implications), as well as the terms of the purchase agreement.
When starting out in any business venture, it is also critical to find out what laws apply to the new business. It is strongly advisable to consult a legal professional regarding all the legal requirements such as licenses, registrations, contracts and leases. In addition to these basic requirements, business owners must also be aware of issues related to employment, fair trading, insurance, credit and debt recovery, finance and taxation. All small businesses must ensure they comply with all relevant employment law, and also laws and rules that related to occupational health and safety. Existing businesses must keep abreast of changes in the law and understand how those changes impact their business in an ongoing fashion (for example, understanding the impact of Work Choices on their operations).
Additional considerations also apply to people intending to use their home as a place of business. There must be compliance with state, territory and local government regulations which often address the potential impact of business activities on the surrounding area (such as parking and energy use). Those people wishing to operate a business out of their home should be aware of any requirements regarding council approval (zoning, signage and health issues), home mortgage and rental agreement restrictions, insurance issues, financial management, taxation and business set-up.
There are many ways in which a solicitor can assist a business operator in successfully establishing or operating a business. Consult one of our solicitors to find out how your needs and interests can be addressed.Whether you are just considering the possibility of starting a new business, whether you are considering buying an existing business, or whether you are already operating a business, it is important to seek the advice of a solicitor.
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