7 Legal Matters Small Businesses Need to Think About
Starting a small business is an exciting time, but it can also be overwhelming, especially when you’re dealing with different legal requirements. From employment contracts to insurance policies, there are several matters that can impact how you can operate efficiently and protect your business from potential legal issues. Today, let’s discuss the seven essential legal aspects that small businesses need to think about.
1. Employment Contracts
Essentially, these contracts are legally binding agreements between employers and employees that outline the terms and conditions of the employment relationship.
Even if you’re running a small business, you need written employment contracts that comply with the relevant legislation, including minimum wage rates and working conditions. It can include confidentiality and intellectual property clauses in such agreements to protect your business’s interests. You might also want to consider including probationary periods, performance review procedures and termination provisions. Through a well-drafted employment contract, you can help minimise legal risks and provide clarity to both employers and employees.
2. Lease Formalities
Planning to lease a building or shop for your small business? Ensure a lease agreement that includes details, such as lease terms, rent payable, and any renewal or termination provisions. Be sure to read the fine print; understand the lease’s terms & conditions, including your rights and obligations as a lessee.
Also, know that you can negotiate a lease agreement. When doing so, consider factors like location, accessibility and zoning laws. As a small business owner, you can also seek legal advice to understand your legal rights & obligations better and ensure you enter into a lease agreement that suits your business needs.
3. Terms of Trade
Essentially, terms of trade set out the rules and conditions for selling goods or services to customers. It is vital to have written terms of trade that outline payment terms, delivery times and any warranties or guarantees. You may also include provisions for resolving disputes with customers, such as mediation or arbitration clauses.
As you grow your small business, regularly review your terms of trade to ensure they are up to date and comply with the relevant legislation. That way, you can continue reducing your company’s exposure to litigation & other legal risks.
4. Succession Planning
Succession planning is another legal aspect small businesses need to think about. It’s the process of preparing for the transfer of a business’s ownership and management to a new owner or manager. You might not think about it yet, especially when you’re starting or in the middle of expanding your company. But small businesses need to have a succession plan in place to ensure business continuity in the event of retirement, illness or unexpected events.
So how to go about it? First, know that a succession plan includes details on who will take over the business, how it will be transferred & any legal requirements for the transfer. It’s best to ask legal and financial experts to help you draft a good succession plan and ensure a smooth transition of ownership in the future. Then, once done, a succession plan must be reviewed regularly and reflect any changes in your business or personal circumstances.
5. Ownership Structure
One of the key decisions that small business owners need to make is selecting the ownership structure. Several ownership structures are available, each with different legal & tax requirements and varying levels of personal liability and control. Let’s take a closer look at each structure:
Sole trader: A sole trader is a business owned and operated by a single person. It is the simplest and most common ownership structure for small businesses. As a sole trader, you have complete control over the business & its profits, but you are also personally liable for all debts & legal claims against the business.
Partnership: A partnership is a business owned by two or more people who share profits and losses. There are two types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have equal control and liability for the business. A limited partnership includes at least one general partner who has unlimited liability and one or more limited partners with limited liability.
Company: A company is a separate legal entity from its owners. It can be owned by one or more shareholders that are likely to have limited liability for the company’s debts and legal claims. A company is subject to stricter legal and tax requirements than other ownership structures.
Trust: A trust is a legal arrangement where one person holds property or assets on behalf of another person or group. In a business context, a trust can be used to hold and manage assets, such as property or investments, on behalf of the business owners.
With the right ownership structure, small businesses can protect personal assets & facilitate business growth. Talk to a commercial lawyer to learn more about this.
6. Insurance Policies
When running a small business, you need adequate insurance coverage to protect you and your employees against potential risks & liabilities. After all, you face various potential risks, including property damage, accidents and legal claims. These risks can leave your business exposed to significant financial losses.
The common insurance policies for small businesses include public liability insurance, professional indemnity insurance and workers’ compensation insurance.
Public liability insurance covers the cost of legal claims made against a business for personal injury or property damage caused by its products or services. On the other hand, professional indemnity insurance provides coverage for businesses that provide professional services, such as consultants or accountants, against claims of negligence or professional misconduct. Another typical policy is workers’ compensation insurance. It is mandatory for businesses that employ workers, as it provides coverage for employees who get injured or become ill due to their work.
Small businesses should regularly review their insurance policies to ensure they’re up to date and cover any new risks. For example, if your business expands or moves to a new location, you may need to update your insurance policies accordingly.
7. Cybersafety
In today’s digital age, small businesses must consider their online presence and cybersecurity. You need appropriate measures to protect your assets & customers against cyber threats, such as hacking, malware and phishing attacks.
As a small business owner, you also need to be aware of your obligations under the Privacy Act and ensure you are collecting, storing & using customer data appropriately. A privacy policy that complies with the Privacy Act can help reduce legal risks and demonstrate your commitment to protecting customer data.
Consult with Bradley & Bray’s Business & Commercial Lawyers
Navigating the legal aspects of running a small business can be daunting, but it doesn’t have to be. After all, Bradley & Bray is here to help.
Based on the Sunshine Coast, we’re a leading law firm that specialises in business and commercial law. With many years of experience advising small business owners, we can help you navigate the legal landscape of your industry.
From helping you with your succession plan to negotiating lease agreements and drafting terms of trade, our team of experienced lawyers will assist you in all aspects of running a small business. We can also advise on ownership structures, insurance policies and other aspects of compliance to protect your business.
Don’t let legal issues hold your small business back. Contact Bradley & Bray today to discuss how we can assist you in achieving your business goals.
This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers takes no responsibility for any use of the information provided in this article.
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