Small businesses must navigate numerous laws, with inadvertent breaches potentially costing thousands. Here, we’ve assembled a list of the most prevalent legal challenges encountered by small businesses. Understanding these common legal issues will enable you to take appropriate measures to mitigate risks.
1. Incorrect tax declarations
Managing tax obligations can be especially challenging for small businesses, as filing taxes is inherently complex. This difficulty may arise from attempting to handle tax matters independently without the expertise of a qualified accountant or from selecting an inappropriate business structure.
One effective strategy to mitigate this risk is conducting thorough research on your tax responsibilities before registering your business. It’s essential to include tax as a liability in your business budget. Additionally, when it comes time to file taxes, enlisting the assistance of a taxation lawyer can provide assurance that all aspects are properly addressed and in compliance.
2. Unsatisfied customers
The success of your business hinges largely on your customers’ experience. However, it’s inevitable that some may express dissatisfaction, whether due to misunderstanding or error.
The crucial approach here is to address the issue promptly to prevent escalation. Proactively addressing concerns and striving to find solutions that satisfy customers can be highly effective. Nevertheless, despite efforts, some customers may remain discontented. A potential risk lies in dissatisfied customers leaving negative online reviews, visible to prospective clients. However, if these reviews contain false information, legal action may be pursued to have them removed.
Conversely, should a customer opt for legal recourse and pursue litigation, seeking legal assistance is imperative. A litigation lawyer possesses the necessary expertise in this domain. Furthermore, having appropriate insurance coverage can safeguard your business in the event of customer injuries on your premises.
3. Licences
In most industries, obtaining a license is a prerequisite for legally conducting business. Building permits, liquor licenses, and real estate certifications are among the most prevalent licenses that business owners must secure. These licenses attest to your familiarity with industry-specific laws and your proficiency in operating requisite equipment.
If uncertain about the necessity of a license, it’s crucial to verify the requirements. Possessing the appropriate license not only demonstrates credibility but also serves as a compelling selling point. Trading without the requisite license can result in substantial fines if caught.
4. Employment
Under Australian law, businesses with fewer than 20 employees are classified as small businesses. While it might seem appealing to hire employees informally, this approach can lead to complications in the future. Even if your employees fall under a Modern Award, it’s advisable to formalize their employment. This can be achieved through an employment contract, which outlines terms of employment, conduct expectations, and grounds for termination.
Additionally, having comprehensive workplace policies enables you to clearly delineate office procedures. Legal challenges for small businesses may arise concerning employees’ social media usage, conduct, or even workplace smoking policies. Therefore, having documented policies addressing these matters is prudent.
5. Intellectual property
Innovative ideas and technologies emerge frequently from individuals and businesses alike. It’s not uncommon for individuals from different regions, such as New South Wales and Western Australia, to independently conceive the same innovative idea. Without prior communication, they may be unaware of each other’s developments, leading to potential legal issues.
Prior to launching operations, it’s imperative to conduct thorough checks to ensure that elements such as your business name, logo, and slogan are not already in use. Online searches can reveal registered trademarks, helping you avoid potential trademark infringement issues. Registering your business’s trademarks early is advised, as they become increasingly valuable assets as your business expands.
6. Choosing a Business Structure
Choosing the right business structure can be a daunting task, whether opting for a sole trader, partnership, company, or trust. Each structure entails distinct tax and legal obligations, adding to the complexity of the decision-making process.
Business circumstances often evolve over time. Many entrepreneurs initially operate as sole traders and transition to different structures as their businesses expand. While being a sole trader offers autonomy, it also entails direct responsibility for legal and financial obligations. As profits increase, individual taxation can become costly. Conversely, companies enjoy limited liability for debts and are considered separate entities from their directors. Moreover, companies benefit from lower tax rates. Therefore, periodically reassessing your business structure’s suitability as your business grows is essential.
7. Raising Capital
Securing capital is essential for scaling your business and realizing its objectives. Throughout the funding process, you may encounter various terms such as Seed Round & Angel Funding, Series A, Series B, and subsequent rounds like Series C, D, E, and beyond. Each stage signifies a distinct phase in your business’s growth, emphasizing the importance of grasping the fundamentals before embarking on this journey.
Navigating the capital-raising process can be daunting, as you may be unsure about the necessary documents, pitfalls to avoid, and where to begin. Engaging a Capital Raising Lawyer at this juncture can provide invaluable assurance that all aspects are appropriately addressed and organized.
8. Starting A Website
The initial step in launching a website involves registering your domain name. However, only registered businesses (holding an ABN or ACN) can register domains ending in .com.au, .au, or .org.au. Additionally, your business must ensure secure payment gateways to safeguard customers’ sensitive information.
Operating a website entails compliance with relevant consumer, intellectual property, and privacy laws. Key documents include:
- Website Terms and Conditions
- Privacy Policy (or GDPR policy if servicing European customers)
Moreover, safeguarding online intellectual property is essential. While website content is inherently protected by copyright, registering a Trademark adds an extra layer of protection for your logo and business name.
Conclusion
Starting your own business entails numerous legal considerations that are crucial to address early on. Delaying these tasks can lead to increased difficulty and higher costs down the line. However, the positive news is that it’s feasible to address these matters affordably while implementing effective preventive measures to safeguard your business.
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