Business & Commercial Law
Business owners can develop a good understanding of business law just from the daily activities of running a business. There are, however, some areas where the stakes are high, and it is wise to seek legal advice. As a business owner, you are likely to need a business lawyer to address various legal issues and challenges throughout your business journey. Whether you need someone to review your contracts and terms of trade, or you plan to expand and need advice on restructuring, your business lawyer should be an integral part of your risk management team.
Choosing a Business Structure
The legal structure chosen when setting up a business should be considered in light of matters such as your financial and personal circumstances, the type of business, and any plans for expansion and growth.
If you are starting a business on your own, you may choose to operate as a sole trader. A sole proprietorship is a simple structure which operates using an Australian Business Number (ABN). A sole trader is legally responsible for all aspects of the business.
If you are starting a business with other like-minded individuals, you may decide to go into a partnership. An important consideration when choosing a partnership is that generally all partners are jointly and severally liable for the debts of the partnership. A written partnership agreement can set out your arrangements so that you and your partners are aware of your responsibilities. The agreement can include provisions for termination, retirement, or sale of the business, and processes to value the business or to resolve disputes, if necessary.
A corporate structure (i.e., a registered company), can provide some level of protection for the owners/shareholders as the company has its own legal status. Companies, however, are more complex structures than sole proprietorships, and there are ongoing costs and annual reporting obligations associated. Company directors must also uphold a range of duties while carrying out their roles.
A trust structure may be useful for protecting assets and may also offer taxation benefits. Trusts, however, are complex and must be set up and administered properly to ensure they achieve the expected objectives.
Buying or Selling a Business
If you are selling your business, you want the best possible price. To achieve this, you may be willing to trade off other terms. For example, you may be willing to wait longer to receive the full price, or you may even be willing to provide advice/training during the transition to the new owner.
If you are buying, you want to make sure that you are going to get everything that you need to run the business successfully, and this varies from situation to situation. You should investigate the feasibility and implications of taking over any leased premises where the business operates, whether you will own the business’s stock, plant and machinery, and if you will receive the business’s existing intellectual property (such as logos and trademarks). You may also need to know if you can obtain any licences needed to operate the business, whether there are any ongoing contracts that you need to fulfil, or service contracts that will continue after the sale.
To understand what you need to know and to negotiate the best possible outcome, you need an experienced business lawyer in your corner. Agreed terms and conditions should be carefully documented in a written contract with room to cover unforeseen events. Each party should be legally represented, and an accountant or other tax professional engaged to advise on the financial aspects of the transaction.
Buying a business can be complex transactions, and the purchasers need to be aware of the pitfalls and the risks, particularly where the goodwill component is a substantial part of the purchase price. You should carry out as much research on the background and the feasibility of the business with the assistance of your accountant.
Electronic Assets
It is important to look at the assets that you are purchasing, to ensure that you are purchasing the main electronic assets of the business:
- Computer programs and or databases
- Damin name
- Telephone number or mobile
- Website
- Suppliers’ details
- Client base information
- Intellectual property
- Licences including liquor licence
Commercial and Retail Leasing
If you need premises to operate your business, you will likely need to enter into a commercial or retail lease. A lease typically involves a significant financial investment, so it is important to ensure that:
- the premises are suitable for the proposed business operations
- relevant approvals/licences are in place or can be obtained
- the commercial provisions (the term, rent and rent increases, renewal options, fit-out provisions, etc.) meet your needs and goals
- the lease is compliant with any relevant retail leasing legislation
- your legal rights are protected and there are provisions to address unforeseen contingencies or events
Similarly, if you own commercial or retail premises that you rent out, you will need a carefully drafted lease agreement with terms and conditions to ensure your investment is protected.
A well-drafted commercial lease with clear terms puts the parties on the same page at the beginning of the relationship and helps avoid leasing disputes down the track. We can assist with drafting, reviewing, and negotiating the terms of a proposed lease agreement as well as lease renewals, transfers, assignments, and sub-letting.
With laws and regulations constantly changing, it is not enough to receive advice once and rely on it for a decade. Tax reform, strengthening consumer protections, and increasing regulation might mean that you need to check in with your business lawyer frequently.
If you need assistance, contact [email protected] or call 02 9601 4311 for expert legal advice.