Why Legals Are Just As Important When Starting A Business
When starting a business, seeking legal advice should be a precaution not a reaction. Find out how seeking a Lawyer's input can help you start your business in the best possible way.
Starting a business is very exciting and most people place a lot of emphasis on designing their brand, logo, website and product. However, the legal implication of operating your own business is often overlooked. Whatever the reason, experience shows that most people either:
- Believe they do not have sufficient funds to allocate to a lawyer; or
- They simply do not believe seeing a lawyer is necessary until something goes wrong.
In reality, both are far from the truth. With respect to whether you have sufficient funds, the legal industry has been adapting to the market conditions and as such most people can find lawyers who offer free consultations, discounted rates for start-ups and free guidance or direction. With respect to seeing a lawyer when something goes wrong, lawyers are actually retained on most occasions to prevent disputes from ever occurring.
What is a lawyer and how can they help you?
The usual tasks of a lawyer include the following:
- Establishing Corporate Structures: This can help minimise personal income tax/ corporate tax and protect your assets from others now, or in the future. If you do not have the right Corporate Structure now, when you wish to change your structure or shareholding in the future, you may have to pay significant sums of money. For example, stamp duty may apply to the transfer of shares in a company to another person at a later stage.
- Drafting Contracts: A well drafted contract will ensure all of the parties involved are on the same page from the start (this includes business partners by way of a Shareholders Agreement). Accordingly, if you have a well drafted contract and there is a dispute, one party may be unable to issue a claim against you because it has already been well spelt out in the contract, or maybe the contract includes a dispute resolution clause preventing a dispute from proceeding any further.
- Drafting Company Policies and Procedures: Often times a company will need internal policies in order to protect themselves in the event something adverse occurs such as an accident in the workplace; an argument between staff members; fraud committed by trusted staff. Having company policies and procedures can prevent or limit your exposure to: Prosecutions from the WorkCover Authority (which can result in a criminal offence); or liability to a third party where your staff has been grossly negligent or fraudulent.
- Cashflow Management: Start-ups and SMEs often struggle with cashflow management. Lawyers can help with payment of outstanding invoices (often times by simply sending 1 letter).
- Governance, Licencing & Standards: If you wish to sell a product to a consumer, you may need a credit licence. If you offer financial advice, you may need a financial services licence. If you are in a particular industry, you may need to comply with an industry code of conduct. If you are selling goods, you may need them to comply with Australian standards. A lawyer in your particular field should be able to identify if there are any governance, licencing or standards which you need to be aware of.
- Getting a customer to pay me you they dispute my bill? (Hint: don’t rush to court): Court should always be a last option because it can be time consuming, costly and stressful. Before going to Court you should always try to resolve your dispute amicably by way of negotiation. However, negotiating with your customer may become a fruitless exercise. Accordingly, depending on the monetary amount owing to you, you should consider engaging a lawyer to send a Letter of Demand. Again, if a Letter of Demand is unsuccessful, consider obtaining legal advice before filing a claim with the Court. You can also consider attending to your local court to speak with a Duty Solicitor who can provide free guidance and advice.
Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.
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 2015 Australian Legal Innovation Index.