5 Legal Considerations You Should Keep In Mind When Starting A Business

Starting a new business is a big step in anyone’s life. For most people, it involves significant financial outlay, huge time commitments and, when it’s not done right, a lot of stress. Thankfully, there are some things that you can do to streamline the process and make things easier on yourself.

For one, you can speak to a commercial lawyer to make sure that you’re taking into account your legal obligations. These vary according to the type of business you’re building and how you’re planning on running it. But, I’ve outlined a few important things that you should keep in mind in this article. They include:

  1. Your business structure

It’s very important to think carefully about what sort of business you want to run and how you want to structure it. Different business structures come with different tax structures, liability levels, and ongoing control. Common business structures in Australia include:

  • Sole trader, where you’re personally liable for your business and its income is reported as part of your tax return.
  • Partnership, which is similar to a sole trader, but which involves the profits and losses of the business being shared between two or more people.
  • Trust, which involves a third party being in control of the business.
  • Company, which is a separate legal entity and which declares its own income for taxation purposes.
Starting A Business

Starting a Business? Protect Yourself!

So, you’ve decided to start your own business, congratulations!  You’re on your way to a fantastic experience as you build a successful enterprise.  Here are a few key tips, documents, and warnings from commercial lawyers and someone who started their own $10 million dollar software company.

  • Protect Yourself. Business is a risky proposition, and starting your own enterprise can put you at tremendous financial risk.  Fortunately, the law provides a way to protect your hard work and safeguard your personal assets, should anything go dramatically wrong in your business.  The entity I’m describing is a corporation, or limited liability company.  Both of these constructs allow you to run a business but shield yourself from liability.  It’s important to do several key things:
  • Corporate ‘formalities’: You can’t start a corporation and then pretend it doesn’t exist, you have to run your business and maintain what commercial lawyers call “corporate formalities” – meaning you have to hold regular managers or shareholder’s meetings, and in all ways act as if it’s the company doing business, not you.