With the school year soon to be underway, many parents will be looking at sending their children to tutoring schools to improve grades in the classroom. Tutoring schools are now becoming lucrative businesses, with many education franchises now well-established across Australia. According to IBISWorld, there is a projected 1.6% growth over the next five years to drive the art and non-vocational education industry to $6.1 billion, of which tutoring takes up 20%. Tutoring is an incredibly competitive industry. Whether you are tutoring one-on-one or are looking to set up a tutoring business, you should understand your legal obligations.

1. Check Restraint of Trade

If you are a teacher or employed as a tutor at an agency, make sure that you are not breaching a restraint of trade or non-compete clause in setting up a tutoring business. Your employment contract may state that you cannot work for, or set up, a tutoring business that competes with your employment agreement. Some restraint of trade clauses has a geographical limit (e.g. 50 kilometres from a particular location) or a time limit (e.g. not within three months of ending an employment relationship). An employment lawyer can assist you to understand whether the contract binds you to a particular restraint of trade clause.

2. Choose a Tutoring Business Structure

A key step in setting up a tutoring business is understanding what type of business structure you should establish. Many tutoring businesses start as small operators (hiring a few tutors) or are independent sole-proprietor tutors. If you are looking to set up a tutoring business as an individual, a sole trader structure will best suit your needs. Relatively easy to establish, a sole trader business structure allows you to have full control over your assets and business decisions. You can use your individual tax file number (TFN) to lodge tax returns, and you are not required to have a separate business bank account.

If you are looking to set up a tutoring business with other tutors, a partnership or company structure may be more suitable. A partnership allows you to jointly run the tutoring business with another person (up to 20 people). You will be required to apply for an Australian Business Number if you are carrying on an enterprise. If you have plans to expand your tutoring business and have limited liability for the directors, a company structure will be more suitable.

Franchising is now also a common expansion method for tutoring businesses. You can choose to buy a tutoring franchise if you do not want to establish your own business. The franchising model means that the franchisor controls the branding, marketing and management practices, allowing you to focus on the day-to-day operations of running the business.

3. Draft Tutoring Contracts

With the exception of a few large operators, most tutoring businesses are small and usually arranged privately with one-on-one sessions. As such, tutoring contracts in private settings are uncommon. However, where there is a delivery of a service between a tutor and a student, it is advisable to have a written tutoring agreement that clearly sets out the terms of the relationship. For tutoring businesses, contracts should disclose all associated fees (joining fees, cancellation fees, etc.) as well as a description of the delivery of the service.

It is advisable parents read any contracts carefully before signing, particularly for tutoring services offered by overseas institutions or online platforms. Research the organisation, ensure they have contact information and are accredited. The Australian Tutoring Association (ATA) is the peak national body representing tutors and tutoring organisations. The ATA requires all its members, who are formally accredited, to abide by a Code of Conduct.

If you are hiring tutors, make sure that all tutors sign an employment contract. Whether tutors work part-time or are higher education students, an employment contract with each tutor should be signed. Where the classification of tutors are as contractors, a contractor agreement should be drafted to ensure there are clear responsibilities and expectations of your tutors. Unlike tutors that are employed by the organisation, independent contractors set their fees and working arrangements and can work for more than one tutoring company.

Key Takeaways

Tutoring businesses continue to expand in popularity as parents seek to provide their children with a competitive advantage in the classroom. In the past five years, online tutoring business models have become readily accessible compared to traditional face-to-face tutoring services. If you are looking to set up a tutoring business, understand the business structures available to you, and whether you are breaching any potential restraints of trade. Moreover, you should have the right legal contracts drafted to protect you and your employees. If you have any questions about setting up a tutoring business, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

Anthony Lieu
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