However, there is a lot at stake. From a business perspective, you need to create a business plan, do your market research and ensure that you have sufficient money to fund your new venture.
Do you need a lawyer for this process? At Douglas Cheveralls, we deal with small and medium businesses, and other syndicates and business ventures, on a daily basis. Sadly, it is often when things go wrong that many people first decide that a lawyer is required. However, we suggest that it’s a smarter move to see a lawyer when you are first starting your business.
The first question we might be able to help you with is what kind of structure your business will have. A company? A partnership? A sole trader? A unit trust? Your accountant may advise you about the tax advantages of these various structures, but if you are looking at one of the more complicated structures such as a unit trust, it would be a good idea to speak to your lawyer about some of the legal issues.
Secondly, if you have business partners (whether it is in partnership, or as co-shareholders or unitholders), it is very important to have an agreement with your partners that address such questions as: How will decisions be made? What commitment of time and money must each partner make? What happens if one partner wants to, or has to, leave? What if a partner is not doing what they are supposed to do? How will disputes be resolved? What if you want to sell the business?
Thirdly, if you are selling services or products, what are your terms and conditions? This is very important. For example, if you are leasing machinery, what are your leasing terms? If you are providing consultancy services, what are your engagement terms? It’s not just a matter of finding a standard contract and adapting it. A well drafted set of terms and conditions can provide you with a great deal of protection and enable you to get paid for your work or products.
There are many other potential traps or opportunities that may only come to light when you speak to lawyer. For example, we’ve recently given advice to one potential business who had no idea that their business idea would put them in breach of the requirement to be registered to provide financial services.
Another client we advised didn’t realise that their business idea would fall under the managed investment scheme provisions of the Corporations Act, and would need to be registered. A third business we advised was unaware that their business idea would involve them breaching copyright. In each case, we were able to provide ways for these businesses to avoid these traps, avoid the risks, and come up with alternative strategies.