common legal issues for small business

No matter the nature of your start-up or small business, there are a range of common legal issues which you will need to turn your mind to.

These legal issues include:

• Your business structure – three of the most popular structures are sole trader, partnership and company (incorporated) structure.  The decision around which structure will best suit your needs will depend upon a range of matters including financial structuring, cost implications, business ownership and risk profile.

 

• The Australian Consumer Law – all businesses that provide products or services to consumers in Australia need to comply with the consumer law which includes a range of guarantees and warranties that cannot be avoided.  This includes providing consumers with a refund, replacement or repair in circumstances where the product which you have supplied is defective, not fit for purpose or doesn’t match the description of the product that you provided (including on your website).

 

• Differentiating between employees and contractors – employees are entitled to a range of employment benefits and entitlements.  It is therefore important to understand whether the person that you are hiring to undertake a task for your business is an employee or a contractor – if you wrongly determine that the person is a contractor and the ATO or Fair Work Australia determine that the person is instead an employee, you will be bound to make good on entitlements that the person would otherwise have been entitled and you are liable to incur fines and penalties.

 

• Protecting your confidential information – the first question for businesses is “what is our confidential information”?  Often, confidential information will include client lists, your financials (including your margins), your design and methodology, ‘secret’ ingredients, contracting arrangements and proposed business takeovers/mergers.  The next question for businesses is “how can we protect that confidential information”?  There are a range of legal and practical mechanisms that businesses can and should implement to protect their information, which is often one of their key assets.

 

• Protecting intellectual property – businesses should consider trademarking those aspects of their brand that sets them apart from competitors.  Similarly, if a business has a particular design underlying its products/service, a new methodology or IT related process which is inventive or innovative, that business should consider seeking patent protection.  Businesses should also take care not to do anything prior to obtaining patent protection which may put the ability to gain patent protection at risk… this includes going public with the idea without appropriate protections in place.

 

• Privacy Act compliance – while many small businesses do not reach the threshold at which compliance with the Australian Privacy Principles becomes mandatory, it is good practice for all businesses (including start-ups and small businesses) to implement compliant processes.  This includes having a transparent and easily understood privacy policy in place and available to clients and consumers.