How Do I Start a Small Business?

At the end of 2019, Australia had over 2.3 million businesses actively trading in the Australian economy. For a nation of 23 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.

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.

As your business grows, you can change your structure from a sole trader to a company relatively easily. You can do this by lodging an application through the Australian Securities and Investments Commission (ASIC) to register your company. The primary benefit of a company includes limited liability. Hence, your personal assets are separate from your business assets.

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.

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.

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. 

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.

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.

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.

Key Takeaways

Operating as a sole trader is a cost-effective way to start a small business. It is essential to ensure that you protect your business and any intellectual property with the appropriate legal documents and register any trade marks.

This article was originally published by LegalVision. If you have any questions or need assistance setting up your business, contact LegalVision’s startup lawyers on 1300 544 755.