In Short
- Starting a small business involves thorough market research and creating a comprehensive business plan to guide your operations.
- Register your business, apply for necessary licences, and understand your legal obligations to ensure compliance.
- Effective financial management and marketing strategies are crucial for sustaining and growing your business.
Tips for Businesses
Begin by researching your market and defining your business goals. Develop a solid business plan outlining your strategy, funding, and objectives. Ensure you comply with legal requirements by registering your business correctly and obtaining the necessary licences. Focus on budgeting and marketing to create a strong foundation for growth.
At the end of 2024, Australia had over 2.6 million businesses actively trading in the Australian economy. For a nation of 27 million, that is an encouraging number of entrepreneurs and innovators. If you are looking to start your own business, this article answers three frequently asked questions about business structuring, intellectual property protection, and which online legal documents you will need to start a successful business.
How Should I Structure My Business?
The simplest business structure is operating as a sole trader, where you trade as an individual rather than an incorporated company. The table below sets out the advantages and disadvantages of this structure.
| Advantages | Disadvantages | |
| Start-up Costs | Low start-up costs. You will need an Australian Business Number (ABN) and Tax File Number to start trading. Applying for an ABN is free and can be done online. | None. This gives you more money to invest back into your business. |
| Liability | None | The liability of a sole trader is unlimited. This means you are personally responsible for any liabilities your business incurs. Your personal assets, like your house, may be up for grabs if your business runs into trouble. |
| Control | You have complete ownership and control over the business. | None |
| Tax | This depends on your personal circumstances. The Australian Tax Office treats business income as personal income, and you pay income tax at your nominal rate. | You are personally liable for all tax on your business’ income. You cannot share business profits and losses with family or friends. |
| Administrative Requirements | You do not need to pay to register a business name as you do not need one (i.e. you can use your personal name to trade). You do not need a separate business bank account, but the law requires that you hold onto your financial records for at least five years. | None |
When selecting a business structure for your venture, consider factors such as:
- long-term goals;
- potential liability risks associated with your industry;
- current tax and financial situation;
- desired level of control; and
- plans for growth and expansion.
While you can change your business structure as your business evolves, it is best to carefully consider your options from the outset, as structural changes can have significant legal and tax implications.
Should I Register a Trade Mark?
If you are not trading under your personal name, you need to register a business name. You can do so online with ASIC. However, registration does not give you exclusive rights to use the name. The best way to obtain this exclusive right to use your business name is by registering a trade mark. This is done online with IP Australia.
A trade mark is a sign that distinguishes your goods or services from another person’s goods or services. You can register a trade mark for your business name, slogan or logo. IP Australia maintains a national register of trade marks, putting other traders on notice that you have the exclusive right to use a mark.
The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
As your business grows, your business name and logo will become some of your most valuable assets. You should take steps to ensure that you can use these marks exclusively. The risk of not registering a trade mark is that another business may be able to register a similar mark and prevent you from registering your own.
Trade mark registration is a low-cost preventative action you can take early in your business. Trade mark registration costs are much less than the costs associated with trying to protect an unregistered trade mark or defending an infringement claim.
Continue reading this article below the formWhat Legal Documents Do I Need to Sell Online?
If you are offering goods or services online, you will also need legal documents to protect your business. These documents feature on your website.
Privacy Policy
A privacy policy is a document that explains how your business handles personal information. It should act as a guide for how your business collects, holds, uses and discloses personal information.
Personal information is information that can be used to identify a person, whether true or not. Your business probably collects all sorts of personal information, such as:
- names and contact details;
- photographs and payment details; and
- information about browser session and location data.
If you are collecting personal information about your customers, you will likely need a privacy policy that covers:
- what personal information you collect;
- how you use that personal information;
- whether you will share the information with third parties;
- access to and correction of personal information; and
- storage and security.
Website Terms of Use
If your business has a website, you will need terms of use to inform your users how they can and cannot act. This legal document protects your intellectual property and limits your liability. It also sets out permissible and prohibited conduct, including excluding competitors.
Your terms of use apply to every person who enters your website. In short, if you have a website, ensure that you have terms of use which set out:
- how people can use your website;
- what they can use the website for; and
- a disclaimer to limit your liability for the information on your website.
Terms and Conditions for Your Products/Services
You need an agreement that sets out the relationship between your customers and the business.
The type of agreement you will need is determined by what type of offering your business provides. The table below sets out a helpful guide on this.
| Offering | Legal Document |
| Services Only | Client Agreement |
| Goods Only | Sales Terms and Conditions |
| Both Goods and Services | Business Terms and Conditions |
The purpose of the relevant legal document is to:
- identify what goods or services you will provide;
- explain how and when you are to be paid;
- protect your intellectual property; and
- limit your liability.
Australian Consumer Law
You also need to ensure that you are meeting your obligations under the Australian Consumer Law (ACL), which offers protection for consumers buying goods and services. The ACL is a national law that protects consumers and ensures fair trading practices. For small business owners, understanding and complying with the ACL is crucial. Key aspects include:
- guarantees on products and services;
- prohibition of misleading or deceptive conduct;
- rules against unconscionable conduct;
- product safety standards; and
- unfair contract terms protection.
Key Takeaways
Operating as a sole trader is a cost-effective way to start a small business. If the circumstances are appropriate, a company structure should also be considered. It is essential to ensure that you protect your business and any intellectual property with the appropriate legal documents and register any trade marks.
If you have any questions or need assistance setting up your business, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Start your small business as a sole trader for simplicity and low costs, as it only requires an ABN and Tax File Number. As a sole trader, you maintain full control but bear unlimited liability, meaning your personal assets could be at risk if the business faces financial issues. For growing businesses, consider transitioning to a company structure to gain limited liability, albeit with increased complexity and costs. Consider your long-term goals, potential liabilities, current tax situation, desired control, and growth plans.
To effectively sell online, ensure you have a Privacy Policy to detail how you manage personal information, Website Terms of Use to govern visitor interactions and protect intellectual property, and Terms and Conditions for Products/Services to outline the relationship with customers. Additionally, comply with Australian Consumer Law, which includes consumer guarantees and regulates fair marketing and product safety. These documents are essential for safeguarding your business and its intellectual property.
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