Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the Australian Legal Innovation Index and recently a winner of the LexisNexis 40 Under 40 (APAC).
An advisory board is a panel of external experts who provide strategic guidance to your business without holding the legal authority of directors. Any Australian business can set one up : there are no registration requirements and no minimum size. Done right, an advisory board fills the skill gaps your management team has, opens networks you don’t, and gives you a sounding board before you make a decision you’ll regret.
- Advisory boards are optional but powerful. There’s no legal requirement to have one, and no ASIC registration needed : you set one up by agreement alone.
- Advisors are not directors and must not act like them. If an advisor starts making decisions rather than giving advice, they may be classified as a shadow director under the Corporations Act 2001 (Cth), which carries personal liability.
- 3 to 5 members is the right size for most small businesses. The Advisory Board Centre reports that organisations commonly establish advisory boards between $1.5M and $100M in revenue , but there’s no rule on size, only readiness.
- Compensation can be cash, equity, or neither. For advisors receiving less than 1% equity, a basic advisory offer letter may be enough. Larger equity stakes warrant a formal agreement.
- A written agreement protects both sides. An Advisory Board Member Agreement sets out scope, term, remuneration, IP ownership, and confidentiality and stops the relationship from drifting.
What is an advisory board?
An advisory board is a group of external experts who advise your business on strategy, growth, or a specific challenge. They don’t vote on company decisions. They don’t have legal authority. They have no fiduciary duties to the company, and they’re not registered with ASIC. What they do have is knowledge and networks you don’t and a willingness to use them for your benefit.
This is what makes an advisory board different from a board of directors. Directors are appointed under the Corporations Act 2001 (Cth), carry personal legal liability, and have formal decision-making authority. Advisors have none of that. The trade-off is that advisory board input is non-binding: you can take the advice or leave it. That’s also the point. It keeps you in charge while giving you access to expertise you’d otherwise pay consulting rates for.
You don’t need to be a Pty Ltd company to set one up. Sole traders, partnerships, and not-for-profits all use advisory boards. The structure works wherever you need outside perspective without handing over governance.
Advisory board vs board of directors: what’s the difference?
| Advisory board | Board of directors | |
|---|---|---|
| Legal authority | Advice only | Yes, with formal decision-making power |
| ASIC registration | Not required | Required (directors must be registered) |
| Personal liability | Generally none | Yes, extensive duties under the Corporations Act |
| How it’s formed | By contract (an advisory agreement) | By company constitution and shareholder resolution |
| Director ID required? | No | Yes, mandatory since 2022 |
| Can override management? | No | Yes (subject to constitution) |
The key thing to watch: the line between advisor and director can blur. If an advisor starts directing staff, signing contracts, or making operational calls on behalf of the company, they risk being treated as a shadow director under section 9 of the Corporations Act. That comes with the full suite of directors’ duties and the personal liability that goes with them. More on this below.
When should you create an advisory board?
Most founders think about an advisory board too late, usually after a problem has already cost them money or time. The better trigger is a strategic question you can’t answer from inside your own business.
Common inflection points for Australian small businesses:
- You’re preparing for a capital raise and investors are asking who your advisors are
- You’re entering a market or industry you don’t have experience in
- A key skill gap in your leadership team is slowing decisions down
- You want a sounding board before making a major hire, partnership, or acquisition
- Your existing networks aren’t opening the doors you need
The Advisory Board Centre reports that organisations most commonly establish advisory boards when they reach between $1.5M and $100M in revenue , but revenue is just a proxy. The real signal is readiness to seek structured external input without handing over control. Some pre-revenue startups need an advisory board from day one. Some $5M businesses don’t need one yet.
How to create an advisory board for your small business
1. Identify the skill gaps you actually have
The most common mistake is building an advisory board around people you know rather than skills you lack. Start by auditing your current team: where are the gaps? If you’re strong on product but light on sales, find a sales leader. If you’re expanding into a regulated sector, find someone who’s done it. The board should complement your team, not duplicate it.
The Advisory Board Centre’s best practice framework recommends defining the board’s purpose before you recruit , not after. Are you looking for a broad strategic sounding board, or targeted input on a specific challenge (entering a new market, preparing for acquisition, building your first leadership team)? The purpose shapes who you need.
A note on friends and family: it’s tempting to start there because it’s easier. The problem is they’re unlikely to push back on you. Advisory board members should be willing to give you advice you don’t want to hear. If they can’t do that, they’re not going to change any decision you’d have made on your own.
2. Keep the board small: 3 to 5 members for most businesses
For a small to medium Australian business, 3 members is often the right starting point. Each person should bring a genuinely different angle , not variations on the same expertise. As your business grows, you can add members with different skills or rotate members out as your needs change. Most advisory agreements build in a fixed term (12 to 24 months is common) with the option to renew, which makes rotation straightforward.
More than 5 members and meeting preparation becomes burdensome, scheduling becomes harder, and the dynamic shifts from advisory to committee. Keep it tight.
3. Set clear expectations from the start
The most common reason advisory boards stop being useful is that no one defined what “useful” meant at the start. Before your first meeting, put in writing:
- How often the board meets (quarterly is standard)
- What the expected time commitment is (including calls and email between meetings)
- What the scope is : are they advising on all strategic matters, or a specific domain?
- Whether they’re expected to open their networks, or just offer their own expertise
- How confidentiality works : advisors will hear sensitive information about your business
These expectations belong in a written advisory agreement, not in a conversation. Lawpath lawyers see this pattern repeatedly: founders and advisors have a great initial conversation, shake hands, and then spend six months with different understandings of what was agreed. The advisor thinks they’re a sounding board. The founder thinks they’re actively working the phones. An Advisory Board Member Agreement puts both parties on the same page before work begins.
4. Decide how you’ll compensate advisors
Advisory compensation in Australia generally takes one of three forms:
| Model | Best for | What to watch |
|---|---|---|
| Equity (shares or options) | Startups and early-stage businesses where cash is tight | Vesting schedules, cap table impact, ESOP structure if giving options |
| Cash retainer | Established businesses with cash to spend | Whether the advisor is classified as an employee or contractor, which affects tax and super obligations |
| Expenses only / unpaid | Very early stage, or advisors who are genuinely motivated by your mission | Harder to hold accountable; works better with clear deliverables in writing |
Equity is common for startup advisory boards, but the structure matters. Across Lawpath consultations, one pattern comes up often: founders offer equity to advisors on a per-meeting basis, thinking it aligns incentives. It does not; it creates administrative headaches for your cap table and looks messy to future investors. Instead, a fixed percentage over a 12 to 24 month vesting schedule tied to the overall advisory term is cleaner.
For advisors receiving less than 1% equity, a basic advisory offer letter with clearly stated terms may be enough. For anything larger, or where the advisor’s contribution is central to a capital raise or product strategy, a formal Start-Up Advisor Agreement is worth the investment. It covers scope of services, IP ownership, confidentiality, and vesting. All of these get complicated later if they’re not set out clearly up front.
5. Get the legal documents right
At minimum, every advisory board arrangement needs a written agreement before the advisor starts. The agreement should cover:
- The nature and scope of the advisory role (advice only, no decision-making authority)
- Term of appointment and how it can be renewed or ended
- Compensation: cash, equity, expenses, or a combination
- Confidentiality obligations: advisors will hear commercially sensitive information
- Intellectual property ownership: anything the advisor creates as part of their role should belong to the company
- Conflict of interest disclosure: advisors should declare any affiliations that could affect their advice
Lawpath’s Advisory Board Member Agreement covers all of these, and lets you set compensation as cash, equity, or a combination. If you’re a startup using equity, the Start-Up Advisor Agreement is set up specifically for option-based compensation through an ESOP structure.
6. Run meetings like you mean it
Your advisors are busy. They’re usually experienced people who have other priorities: running their own businesses, sitting on other boards, or working senior roles. If meetings are poorly prepared, they disengage. A vague agenda produces vague advice.
Practical habits that keep advisory boards functional:
- Send an agenda and any materials at least a week before each meeting
- Come with 2 to 3 specific questions you want the board to help you think through , not a business update
- Take notes and send a brief follow-up summary with any actions you’ve committed to
- Meet quarterly as a minimum; more frequently when the business is going through rapid change
- Have individual calls with board members between meetings when their specific expertise is relevant
The shadow director risk: what Lawpath lawyers see in consultations
This is the issue most advisory board articles skip, and it’s the one most likely to create real legal problems.
Under section 9 of the Corporations Act 2001 (Cth), a person can be treated as a shadow director if the company’s directors or officers are “accustomed to acting” on that person’s instructions or wishes. An advisory board member who drifts into directing staff, approving decisions, or being held out publicly as having authority they don’t legally have is at risk of being reclassified as a shadow director, with all the personal liability that comes with it.
Lawpath lawyers flag this risk regularly in consultations, particularly in three situations: co-founders who transition from director to advisor (a common step when one co-founder relocates overseas or steps back from daily operations), advisors who hold significant equity and want more say over decisions, and situations where a vendor or seller receives advisory status as part of a business acquisition. In each case, the advisory agreement must make one thing crystal clear: the board retains full discretion, and the advisor cannot bind the company or direct its affairs.
If you’re transitioning someone from a director role to an advisory role, the directorship must be formally ended by lodging ASIC Form 484 to record director cessation. An advisory agreement alone is not enough. The ASIC register must be updated to reflect that the person is no longer a director.
Conflict of interest: a clause most advisory agreements get wrong
Conflict of interest management is where many advisory board agreements fall short. Advisors often sit on multiple boards, consult for several businesses, or have affiliations with universities, research institutions, government bodies, or industry groups. Any of these could affect the advice they give you.
A well-drafted conflict of interest clause should require disclosure of all current affiliations upfront, not just obvious competitors, and include a process for managing ongoing conflicts as the relationship progresses. The clause should be cross-referenced in the main agreement and completed via a declaration signed before the first meeting.
Lawpath lawyers recommend being specific about what must be disclosed: university and research institution connections, government body memberships, industry association roles, and any commercial relationships with businesses in your sector. Generic language (“advisors must disclose conflicts of interest”) creates disputes later about what counts as a conflict.
Where to find advisory board members in Australia
Finding the right advisors is harder than finding any advisors. A few routes that consistently produce better candidates than a LinkedIn post:
- The Advisory Board Centre (linked to business.gov.au) offers an Advisor Concierge Service that connects Australian small and medium businesses with vetted independent advisors across industries and sectors.
- State chambers of commerce , particularly useful for finding advisors with local market knowledge and existing business networks in your region.
- Accelerator and incubator alumni networks , former participants who’ve built and scaled businesses in your sector often make strong advisors and are usually willing to give back.
- Your existing investors or lenders : if you have investors, ask them for introductions. An investor-recommended advisor often comes pre-aligned with your commercial direction.
- Industry associations and professional bodies , particularly for regulated sectors (healthcare, financial services, construction) where sector-specific experience matters more than general business acumen.
Avoid starting with the most impressive name you can find. Relevance and availability matter more than reputation. An advisor who’s genuinely engaged with your business quarterly is worth more than a prominent name who attends two meetings and loses interest.
What documents do you need for an advisory board?
At minimum, you need a written agreement with each advisor before they start. Depending on your situation, you may also need:
- Advisory Board Member Agreement: the core document covering scope, term, compensation, confidentiality, IP, and conflict of interest. Suitable for cash or equity compensation arrangements.
- Start-Up Advisor Agreement: for startups compensating advisors through an employee share option plan (ESOP). Treats the advisor as an independent contractor and covers option-only arrangements.
- Advisory board charter: not a legal document, but a practical governance document that sets out how the board operates: meeting frequency, quorum, agenda process, and how advice is recorded and actioned. Particularly useful when you have 4 or more advisors.
You’ll also want to look at the board observer role if you have investors who want visibility into your board without a formal seat : a related structure worth understanding before you start appointing advisors to fill a gap that observers are better suited to.
Frequently asked questions
Does an advisory board need to be registered with ASIC?
No. Advisory boards have no legal status under the Corporations Act and don’t need to be registered with ASIC. You set one up by entering into an advisory agreement with each member. There’s nothing to lodge, no approval required, and no minimum structure : you just need a written agreement in place.
How much equity should I give an advisory board member?
The amount varies widely depending on the advisor’s seniority, the value they’re providing, and your stage. A common range for Australian startups is 0.1% to 1% over a 12 to 24 month vesting period. For advisors who are volunteering their time with no other compensation, 0.25% to 0.5% is typical. For highly experienced advisors who are actively opening doors (investor introductions, key customer referrals), up to 1% is reasonable. Anything above 1% is unusual for a pure advisory role and may concern future investors.
Can an advisory board member be held personally liable?
Generally, no: advisory board members don’t carry the personal liability that directors do. But if an advisor starts directing the business’s affairs and the company habitually follows their instructions, they may be classified as a shadow director under the Corporations Act 2001 (Cth). A shadow director carries the same legal duties and potential liability as a formal director. This is why the advisory agreement must clearly state that the board retains full discretion over all decisions.
Do advisory board members need a Director ID?
No. Director IDs are only required for people who are formally appointed as directors of a company. Advisory board members have no formal legal role under the Corporations Act, so no Director ID is required.
What’s the difference between an advisory board and a startup advisory panel?
No meaningful legal difference. “Advisory panel” is informal language sometimes used for looser arrangements, particularly in early-stage startups with a larger group of advisors (sometimes 8 to 12 people) each contributing in a narrow domain. An advisory board typically implies a more structured group with regular meetings and a formal agreement. The legal documentation is similar either way: each advisor still needs their own written agreement covering scope, compensation, and obligations.
Can a sole trader have an advisory board?
Yes. You don’t need to be a company to have an advisory board. Sole traders, partnerships, and trusts can all use advisory boards. The structure is defined by contract, not by your business entity type. An advisory agreement between you and each advisor is all you need to formalise the arrangement.
How do I end an advisory board arrangement?
The process depends on what your advisory agreement says , which is why having one matters. Most advisory agreements include a fixed term (12 to 24 months) with a notice period for early termination (typically 30 days). On termination, the advisor’s confidentiality and IP obligations usually continue. If the advisor received equity, vested equity is generally kept; unvested equity lapses. Make sure your agreement covers the leaver scenarios before you sign it, not after.
Is advisory board compensation subject to GST or superannuation?
It depends on the structure. If an advisor is engaged as an independent contractor and invoices for their services, GST applies if they’re registered for GST. If the arrangement looks more like an employment relationship (regular hours, direction and control, personal service), payroll tax and superannuation obligations may apply. Equity compensation has its own tax treatment depending on whether it’s structured as shares or options. Get accounting advice before finalising compensation terms.
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Setting up an advisory board: you’re closer than you think
Most business owners put off building an advisory board because it feels like a big-company thing, something you do after you’ve made it, not while you’re making it. That’s the wrong way to think about it. The businesses that grow fastest are usually the ones that figured out early they couldn’t do it alone, and built the relationships to prove it.
Start with one or two advisors, get the agreements right from day one, and run the meetings well. The rest sorts itself out. Your next step is to set up your Advisory Board Member Agreement : it takes minutes and sets the foundation for every advisory relationship you build from here.
