You’re a small business with customers and revenue. But you’re unsure if you’ve covered everything from a legal perspective. If this sounds familiar, now is a good time to take a step back from your day to day business activities to address any legal gaps before proceeding full steam ahead. This article will explain why a legal health check is a great solution to this common scenario for small businesses.

What is a Legal Health Check?

A legal health check is a step by step assessment of your business’ legal needs. It should be conducted by a lawyer or someone who is legally trained in commercial law. A legal health check determines the steps you have taken legally and those you still need to take to ensure “legal best practice”. By auditing your small business’ legal position, you will minimise the risks to your small business. A check identifies steps you can and should take immediately as well as those you need to take when your business reaches a particular milestone, such as hiring your first employee.

A legal health check can be conducted:

  • online;
  • via phone; or
  • in a face-to-face meeting.

It is often better to conduct the check by phone or in person so that any steps can be explained in full before you commit to them. After your check, you should have enough information to know what your next steps are and what those steps involve.

Why is a Legal Health Check Useful?

Not every small business can afford the time and money it takes to operate with legal best practice when they start out. That’s okay, as long you’re willing to take on this risk (and every business owner knows that starting a business is risky). However, a legal health check is a great way to establish where you are legally and what you need to do.

For example, you may have registered your business name but not yet have a trade mark. A legal health check will identify that you do not yet have the exclusive right to your business name, investigate whether you can register it as a trade mark and when you should do so.

Additionally, a legal health check looks forward. What are your growth plans and how can you get there?

For example, a legal health check can pinpoint when you might need to look at implementing a distribution agreement compared to just relying on your terms and conditions. This kind of road map can help you to match your future legal needs to your business plan. A strategic approach like this is much more useful than responding to business milestones as they happen, which can often lead to mis-prioritising or missing legal needs.

The Most Important Legal Issues Covered in a Legal Health Check

Legal health checks are tailored to your business and industry. Accordingly, your check may look very different to that of another small business. For example, a Legal Health Check for a bar owner will cover liquor licensing requirements.

However, regardless of your industry, size or goals, the main areas any check will zoom in on are:

Business Structures

A conversation about business structures covers:

  • the different types of structures available to a small business;
  • which minimise your personal liability;
  • the basic tax differences between different structures; and
  • what you need to consider if you are going to restructure your business.

A legal health check may identify changing your business structure as a priority or, rather, point out a time in your business life cycle where you should consider restructuring.

IP Protection

IP protection addresses which parts of your brand you should protect and how you can do so. This includes protecting:

  • your brand name and logo;
  • the IP on your website; and
  • your ideas and products.

A legal health check may identify:

  • IP you didn’t realise you owned;
  • steps to protect that IP immediately; and
  • steps you can take to protect future IP.

Contracts

A legal health check should cover the contracts your business needs to minimise its legal risk. The type of contracts covered by a legal health check will vary, depending on the goods or services your business provides and how it operates.

For example, an e-commerce business sells products through a website. A legal health check will cover contracts such as terms and conditions, privacy policy and terms of use.

A legal health check can identify:

  • changes you need to make to your current contracts to ensure they’re legally watertight;
  • any contracts you need immediately as part of your business operations; and
  • contracts you might need if your business grows.

Australian Consumer Law

Every small business needs to comply with Australian Consumer Law if you are selling goods or services to consumers. A legal health check should:

  • identify if your business needs to comply with consumer laws in Australia; and
  • check what steps you need to take to ensure that you comply.

This can be complex and include:

Hiring Employees

Hiring employees should be covered as part of any legal health check because it’s an area of risk for all small businesses.

If you currently hire employees, a legal health check can identify if your method of hiring and your employment contracts comply with Australian employment law.

If you do not currently hire employees, a legal health check can identify what you need to do when hiring someone and the documents you will need.

What Are the Next Steps After a Legal Health Check?

After a legal health check, you should know:

  • the legal gaps in your business;
  • which steps are most important; and
  • the cost to complete those steps.

All aspects are important, because not all small businesses have the revenue to address everything at once.

For example, your legal health check may identify that you need to register a trade mark for your business logo, put a privacy policy on your website and create employment contracts for your first employees. You can prioritise the trade mark registration and privacy policy over the employment contracts if you know that you won’t be hiring employees for another couple of months.

Key Takeaways

A legal health check is a valuable tool to identify your business needs both now and in the future, when you hit key milestones. It should also cover basic areas of law for small businesses, including:

  • business structuring;
  • protecting your IP;
  • business contracts; and
  • hiring staff.

If your small business would like a free legal health check, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
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