At the end of 2015, Australia had over 2.1 million businesses trading. For a nation of 23 million, that’s 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, IP protection and online legal documents.
How Should I Structure My Business?
The simplest business structure available 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.
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.
|None – more money to invest back into your business!|
|Liability||None.||You are personally responsible for any liabilities your business incurs. This means that your personal assets (e.g. 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 ATO 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 don’t need to pay to register a business name as you don’t need one (i.e. you can use your personal name to trade). You don’t need a separate business bank account but must hold onto your financial records for at least five years.||None|
As your business grows, you can change your structure from a sole trader to a company relatively easily. The primary benefit of a company includes limited liability, meaning your personal assets are separate from your business assets.
Should I Register a Trade Mark?
If you aren’t 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.
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, which will put other traders on notice that you have the exclusive right to use a mark.
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. The costs of trade mark registration are much less than the costs associated with trying to protect an unregistered trade mark or defending an infringement claim.
What 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.
- 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.
- 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.
|Services only||Client Agreement|
|Goods Only||Sales Terms and Conditions|
|Both Goods and Services||Business Terms and Conditions|
The purpose of the agreement 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.
You also need to ensure that you are meeting your obligations under the Australian Consumer Law which offers protections for consumers buying goods and services.
Operating as a sole trader is a cost-effective way to start your business. Ensure that you protect your business and any intellectual property with the appropriate legal documents and by registering a trade mark. If you have any questions or need assistance setting up your business, get in touch with our specialist e-commerce lawyers on 1300 544 755.
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