There are multiple factors that impact the success or failure of a startup.

In Australia, entrepreneurs are being put out of business by more than just underdeveloped planning and poor sales. The grim reality is that over 95% of new startups are destined to fail. Many of these are sunk by preventable legal pitfalls that new business owners did not foresee or did nothing to protect themselves against. When you have solid foundations in place to protect yourself and your business against unnecessary risk, you can devote your energy full time towards making your startup dream a success.

Below are some strategies to deal with avoidable legal issues in business early and effectively.

Have A Clear Ownership Structure

The common legal structures for businesses include sole trader, company, partnership and trust.

Choosing the right legal structure for your business from the outset is important as some structures provide protection against personal liability for debts and legal disputes. It also impacts your tax obligations and expenses and makes it easier to sell your business in the future, if you wish.

A Shareholders’ Agreement

Even if your partners are your parents or your best mates, a shareholders’ agreement is an important and necessary document that clearly sets out the rights and responsibilities of each shareholder in your company.

Without such an agreement in place, in the case of a legal dispute, it will be up to a court to decide the outcome.

There is no ‘one size fits all’ shareholders’ agreement. Each agreement must be drafted according to your unique set of circumstances and the outcome the shareholders wish to achieve in relation to shareholder funding or contributions, director appointments, how the company should be managed, dividends and financing, transfers of shares or an exit strategy.

Depending on how much of the company certain shareholders own, for example, the agreement may also stipulate that minority shareholders cannot be forced out of decision-making by majority shareholders.

You can start by downloading a basic shareholders’ agreement template and supplement basic clauses according to your needs by speaking with a legal professional.

A Commercial Lease You Understand

Commercial leases can be complex documents which spell out the rights and responsibilities of both landlord and tenant.

If you don’t understand the lease document, you could end up being liable for costs you didn’t anticipate such as utilities, repairs, taxes and the cost of documentation regarding the lease.

You may also have difficulty renewing the lease. Fighting a lease dispute can be expensive and losing such a dispute could mean that your company loses its space.

Make sure you fully understand the legal implications of your commercial lease agreement before signing.

Have Proper Warehouse Safety Equipment

If your business has warehouse space for storage, it is critical to have proper equipment and procedures in place that comply with Work Health and Safety legislation to protect your staff from preventable injuries.

Loads falling onto forklift operators and other workers account for a high percentage of Australian workplace injuries and fatalities. Forklift safety cages and large goods cages, for example, protect operators and everyone else working in the immediate area from physical injuries and protect your startup from potential workers compensation claims.

Mandatory Sexual Harassment & Bullying Education

No doubt you agree that this behaviour has no place in your workplace, but do your employees understand exactly what is defined as sexual harassment or bullying?

As a business owner, if you don’t dedicate the time and resources to train your employees in appropriate workplace conduct, you could leave yourself open to large fines for breaching workplace health and safety legislation. The resulting financial drain on your startup could quickly put you out of business.

Understand relevant legislation surrounding workplace health and safety, bullying and sexual harassment and have each employee complete the necessary compliance training.

Maintain Detailed Record Keeping

A commitment to detailed record keeping is necessary for many reasons including invoicing and accounts receivable, tax compliance and payroll.

If your company is not large enough to hire a full-time accountant or business manager, record keeping is a task that you can adequately perform yourself by using accounting and online bookkeeping software like Xero. If you don’t have time to maintain your own records, it is worthwhile contacting an accounting firm in your area.

Yes, outsourcing this work is an ongoing overhead expense, however, failure to keep accurate records can lead to serious problems for your business, the consequences of which can doom your startup before it starts.

Compliance With The Privacy Act

Depending on the nature of your business, you may be collecting data about current customers and potential customers.

As a business owner, it is critical that you comply with your obligations under the Australian Privacy Principles to avoid breaching the Privacy Act in the way that you collect, store, use and disclose private information about your customers.

Mishandling or misusing private information can lead to serious fines and penalties.

Conclusion

These are some of the main legal risks faced by Australian startup owners.

Understanding your rights and obligations, and building your business on a rock-solid platform, places you in a strong position to avoid any unforeseen obstacles that may impede your startup success.

What unanticipated difficulties have you encountered on your startup journey? Let us know in the comments below!

It started with changing the way we shop. Then the digital era revolutionised the way we communicate.

Now the internet, technology and innovation are beginning to disrupt the legal industry. With more and more of us venturing online in search of cheaper and faster access to legal services, the legal industry is responding. Both major firms and smaller practices are moving away from the traditional ‘bricks and mortar’ business model.

Digital law firms offering fixed-fee legal services and customisable basic legal documents are becoming the preferred, and much cheaper, alternative to hiring a lawyer in the conventional way.

For young Australians, this opens up a world of possibilities – now your business, entrepreneurial, creative or personal vision does not have to remain a dream. With legal information and services instantly available online, accessing the law and resources needed to make it a reality, has never been easier.

What Legal Services And Forms Are Available To You?

The range of legal services and legal documents offered online for everyday Australians is quite staggering. The Lazy Law offers personal legal templates such as an Australian Will Kit, basic contracts, personal loan agreements or power of attorney that are fully customisable to meet your specific set of circumstances.

For businesses, you’ll find that Allens Accelerate, LegalVision and LawPath provide documents required for forming, running and selling your company, hiring employees or independent contractors, protecting intellectual property and lots more.

In addition to providing free or significantly cheaper legal documents, digital law firms are also providing reduced-cost legal services. This means you can always access and speak with a lawyer about your particular issue.

Are Online Legal Services Right For You?

The answer to this question depends on your specific set of circumstances.

In the case of legal documents, if you have a fairly common issue for which legal forms are required, using a document supplied by an online legal service is a relatively safe bet. Make sure that the documents are written by lawyers, that the legal service has received consistently positive reviews, or has been recognised with awards from independent industry bodies or the media.

If your legal issue is more complex, there is no substitute for speaking with a solicitor specialising in your specific area of law, either using an online legal service or traditional law firm. For example, if you require legal documents or advice on a large company with complex business dealings, or a large personal estate containing diverse assets, it is essential to speak with an experienced legal professional.

Should You Use Online Legal Documents?

If you’re thinking about going the DIY route for legal documents, these pros and cons may help you make up your mind.

Let’s start with the advantages of using online legal documents:

• The cost is very affordable compared with hiring a lawyer to draft your legal documents
• You do not need legal training or experience. Simply download your required forms and customise them to your needs
• Going online is fast and convenient
• Most forms are written in plain english and are easy to understand
• Many online legal services such as LawPath provide users with access to an solicitor meaning you can ask a question and receive a brief consultation, for either no charge or for a small fee. If you are not sure what you need, you can receive a free legal health check for your business.

Some potential disadvantages of using online legal documents:

• Unless you are obtaining online legal services in conjunction with your legal documents, no one will check that the information you provide in your documentation is correct. This could leave you exposed to unforeseen litigation
• While there are explanations on most sites of each document’s purpose, it is your responsibility to choose the correct form
• Not all online legal services offer reliable legal documentation. It is important to choose a service with a sound reputation, established by a team of lawyers and with a proven track record.

The Bottom Line

Consider the complexity of your legal issue and do your research.

A growing number of Australian digital law firms are providing high quality, reliable and cost-effective legal documents and services. If you choose to download and fill out your own legal documents, but are uncertain about whether you are adequately protected, always to seek professional advice sooner rather than later.

Have you, or would you ever, use online legal services or documents for personal or business matters? Tell us about your experiences in the comments section below!

Further Information

For reliable, cost-effective and efficient online legal advice or documents visit:

• LawPath
• LawAdvisor
• LegalVision
• Allens Accelerate
• The Lazy Law
• Base Legal
• Motus Legal
• Moores