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Raja Abbas
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Wanting to start a business but are unsure of the legal requirements? Do you run a business and are unsure about the legal aspects you should take into consideration? When operating a business, regardless of the size, there are legal requirements you must abide by. These legal requirements can be extensive, and business owners often tend to feel lost in the mayhem of checklists. We have written this article to help you navigate the legal realm of operating a business.
Business Structure
Deciding what business structure best suits you is important as it will determine further legal requirements such as licensing, financial obligations and tax.
Business structures include sole traders, partnerships, companies and trusts. There are several advantages and disadvantages of each structure.
If you are unsure about what business structure best suits you, Lawpath offers a free quiz that can help determine which structure is more tailored to you.
Registrations: Australian Business Number (ABN) and Tax File Number (TFN)
Registering your business is one of the first of many legal requirements which you must abide by when operating a business. There are various costs and steps associated with registering your business. There are two primary prerequisites when registering your business:
Tax File Number (TFN)
Applying for a Tax File Number (TFN) is a legal requirement when running a business. However, other business structures such as partnerships or companies require an individual TFN. The Australian government monitors all affairs associated with TFNs and has a page dedicated to registering for a TFN. There is a possibility you already have a TFN and need help finding it.
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Australian Business Number (ABN)
An Australian Business Number (ABN) is an 11 digit number issued by the Australian government. An ABN if a legal requirement and is used to prove the legitimacy of a business, ensure taxes are not being withheld or issued incorrectly and to monitor business transactions. Applying for an ABN will also ensure businesses can claim goods and services tax (GST) credits.
Need assistance registering for an ABN? Lawpath offers a service which may assist you when registering for an ABN.
Taxation
Applying or ensuring tax related services are used when operating your business is a legal requirement. There are different taxation requirements which are reliant on your business structure. It is important to determine what taxation obligations you have. Failure to ensure taxation obligations have been met can lead to large sums of fines or the closure of your business.
Below are a few taxation requirements you should take into consideration:
Goods and Services Tax (GST)
If your business generates an annual turnover of $75,000 or more, you must register for GST. Without registering for GST when earning above this threshold, you can be held liable for not being compliant with legal requirements. You must have an ABN when applying for GST. The Australian Business Register has a page which may assist you in applying for GST and ensuring you have met the prerequisites for it.
Pay As You Go (PAYG)
Pay As You Go (PAYG) is designed to collect income tax and GST throughout the year instead of one large lump sum at the end of the year. Businesses must apply for PAYG to ensure employees are taxed correctly and accuracy when reporting. Lawpath offers a service which may assist you in navigating tax related matters for your business.
Superannuation
Superannuation refers to the retirement savings system where employers are required to contribute 11% of their employees earnings into a superannuation fund. It is a legal requirement and failure to meet these obligations can result in large penalties.
Contracts and Agreements
Ensuring contracts and agreements have been drafted correctly is an important legal requirement for businesses to fulfil. It is essential for businesses to seek legal advice when it comes to contracts and agreements to ensure that they are properly drafted, compliant with legal regulations and tailored to the business.
Drafting proper and concise documents is one of the most important legal requirements when it comes to business operations. Some contracts and legal agreements that are required for businesses to draft include:
Employment Contracts
Employment contracts set out the terms and conditions for employees working for your business. These contracts are a legal requirement and failing to draft them properly can result in legal action being taken against your business. Employment contracts are also important in setting out the responsibilities employees are expected to fulfill alongside any compensation or benefits they are entitled to.
Non Disclosure Agreements (NDAs)
Non Disclosure Agreements (NDAs) safeguard confidential information which ensures a person or organisation who has access to this information does not disclose this information to any third party without your consent.
Privacy Policies
Privacy policies are legal documents which outline how and why a business collects and protects personal information/data from their customers. Developing a privacy policy is one of the most under considered of all legal requirements as it is often forgotten and brushed away. Having a privacy policy in place is essential as it is a legal requirement to ensure transparency with your customers.
Partnership Agreements
If you run a business with multiple partners, it is important you develop a partnership agreement. Partnership agreements set out ownership percentages, decision making processes and the roles of directors.
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A Privacy Policy is required by law in certain circumstances. It outlines how your business will use, store and collect your customers information.
Employment Law: Legal Requirements
There are various legal requirements when it comes to employees of a business. If you have hired employees for a business, it is imperative to consider the employment law obligations you must fulfill.
Fair Work Australia (FWA)
The Fair Work Act 2009 (Cth) sets out the requirements for employment such as base rates of pay, terms relating to superannuation and the relationship between employees and employers. Businesses must be compliant with this legislation as lack of compliance will lead to action being taken against the business. Following FWA is one of the most important legal requirements when running a business, with action being taken against the business if there is no compliance.
National Employment Standards (NES)
The National Employment Standards (NES) are the 11 minimum requirements employees must provide to their employees. It is a specific part of the FWA. These standards cover aspects such as leave entitlements, penalty rates and other the maximum amount of hours an individual can work.
Work Health and Safety (WHS)
Work Health and Safety (WHS) is about ensuring that employers consider the safety, health and welfare of employees when at work. WHS includes ensuring there is a first aid plan, provide adequate training and ensuring the health of employees if a priority at their place of employment.
Licensing and Permits
If the type of business you are operating requires a license or permit, it is integral you apply for them. Ensuring you have the correct licenses and permits are one of the legal requirements of operating a business.
Examples of some licenses and permits include:
- Alcohol licenses
- Childcare licenses
- Healthcare licenses
- Export/import licenses
- Tobacco retailer license
E-Commerce and Online Presence
In response to the rise of digitalisation and online businesses, there have been developments in regards to the boxes businesses must check to operate lawfully. There are a few requirements you must adhere to when establishing an online presence or using e-commerce to sell products or services.
Privacy Laws & Terms and Conditions
Developing comprehensive and in detail privacy laws and terms and conditions are legal obligations you must follow when operating a business within the digital realm.
The Privacy Act 1988 (Cth) governs the collection, use and disclosure of personal information. Ensuring your privacy policy regarding the collection and use of data adheres to the law is important or you may face legal consequences.
Developing terms and conditions for your online business legally protects your business as it sets out rules, terms and policies that govern the website. By clearly outlining these terms and conditions, you can protect your business’s interest and reduce the risk of legal disputes.
Domain Names
Whilst registering for a business domain is not a necessity, there are a few legal requirements associated with registering for a domain name. This includes ensuring that your domain name does not violate any existing trademarks or abiding by the terms and conditions/policies of the domain registrar. The Australian Domain Administration (auDA) overlooks affairs associated with registering a domain name and tools associated with attaining a domain.
Online Transactions
Transactions that are made online through E-Commerce are still subject to taxes such as GST and warranties. The Electronic Transactions Act 1999 (Clth) governs transactions made online. law recognizes electronic communications and signatures as legally binding. Ensuring your business is still compliant with transactions alongside abiding by the Electronic Transactions Act are important to adhere to in order to operate lawfully.
Bring your business into the future by registering a virtual office
Having a virtual office means you can securely store your documents and protect your privacy.
Financial Reporting
Prepare accurate financial statements in compliance with accounting standards and regulations, including Generally Accepted Accounting Principles (GAAP)
Tracking your business’s finances is an important procedure for any organisation. Section 292 of the Corporations Act 2001 (Cth) sets out the legal requirements businesses must follow when reporting financial information and how to disclose such information. If your business’s reporting procedures are not in accordance with these requirements you are subject to being held legally liable.
The Australian Securities and Investments Commission (ASIC) is the regulatory body responsible for enforcing compliance with financial reporting requirements in Australia. Information that is financially incorrect or deceptive will be dealt with by ASIC. It is important to review financial statements, audits and transactions and operate transparently with ASIC, customers and employees. Legal action will be taken against businesses make deceptive statements or fail to report their financial information correctly.
Environmental Regulations
Whilst environmental regulations are rooted in the law and policies, businesses who go beyond these requirements and actively integrate sustainability in their operations are likely to increase their customer base in response to the rise of wanting to support environmentally friendly businesses.
Regardless, it is important to adhere to environmental regulations when operating as it is one of the business legal requirements that must be followed. This includes being compliant with the Environmental Protection and Biodiversity Conservation Act 1999 (Clth) which monitors activities that may threaten habitats and species and the National Greenhouse and Energy Reporting Act 2007 (Clth) which requires businesses to report their emissions and waste.
If you are unsure about what environmental obligations your business has, we recommend seeking legal assistance.
Anti-Discrimination and Equal Employment Opportunity (EEO)
In response to Australia’s diverse workforce and consumer base, there has been a rise in relation to the legal requirements associated with anti-discrimination and ensuring there are equal employment opportunities (EEO) in Australia.
Anti-discrimination refers to businesses actively eradicating any form of discrimination when operating amongst all stakeholders. EEO refers to businesses ensuring that all employees are granted the same opportunities regardless of race, sex or disability.
There are set laws businesses must be compliant with when operating.
Such laws include:
Racial Discrimination Act 1975 which prevents discrimination on the basis of racial or ethnic grounds.
Sex Discrimination Act 1984 which prohibits discrimination on the basis of gender, pregnancy or sexual orientation.
Age Discrimination Act 2004 which protects individuals from age-based discrimination.
Conclusion: Legal Requirements for Dummies
Overall, there are various legal considerations you must make as a business owner. These considerations extend to financial, social and digital aspects of operation. Failure to be compliant with these legal requirements is likely to lead to action being taken against the business or business owner. Navigating the legal requirements associated with running a business can be complicated, and we have demonstrated 10 important legal requirements with running a business in this article.
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