ESTABLISHED IN 2018
Your passion is becoming your business. Yes, we're excited too!
But this is your first time, so you need a trusted considerate advisor to support you on your journey. We advise you about the ins and outs of getting off the ground. And for all of your funding and accounting needs, we can refer you to our trusted advisors.
Being in business needs a basic understanding of legal personality because liability attaches to the behaviour of the legal person.
The two types of legal personality are:
If you run your business as a sole trader, you will be personally responsible for each purchase and sale, and for all of the risk that attaches to business.
If you start a company, as a shareholder and potentially as director, you may be protected from liability for transactions entered by the company.
With every step you take in business - buying goods or services, advertising to your potential customers, engaging employees to support your growth, selling your goods or services to others - you expose yourself to risk.
The Corporate Veil
The office bearers and shareholders behind companies are largely protected from liability to third parties. The liability shifts from you as an individual in business to the company. If something goes wrong, it is usually the company who is sued.
Office bearers are company directors and secretaries.
A director is the acting mind and will of the company, and is often the public face of the business. Secretaries are responsible for ensuring the company complies with its reporting duties to the Australian Securities and Investments Commission, among others. The company secretary is also tasked with maintaining the company records and register.
Can a Director be Liable?
We say "usually" above because the law will protect a creditor or consumer from the conduct of an office bearer and/or shareholder if warranted. While an individual can be a company director, secretary and shareholder, the corporate veil raised by the creation of the company to protect the individual's assets from liability will be pierced if appropriate. This means the office bearers can be personally sued and not just when they have elected to be a guarantor for a loan.
Being an employee is likely one of the reasons you are taking your passion to a commercial level. You may also still be working for someone while your business finds its feet. Either way, you understand the terms and conditions of employment must be clear, and must meet certain standards.
Those standards are the Modern Awards, Enterprise Agreements and individual contracts. Each standard is underpinned by past court decisions that help lawyers and the community understand how the Awards, Agreements and contracts apply in certain situations. This type of law is known as the common law. It predates written agreements and standards, and in some areas still outlines the essential elements of an employment relationship.
Additional to Awards, Agreements, contracts and the common law, is federal legislation including the Fair Work Act 2009 (Cth) which requires employers to provide minimum conditions for all employees. These mandatory standards are outlined in the National Employment Standards.
What many business owners do not consider when starting their business is whether they should be engaging themselves formally as an employee. There's a few layers of complexity to this and you'll need strategic advice to make good decisions for your future.
Some considerations are:
Many businesses commence their commercial lives as sole traders.
The law permits you to run a business using a name and style that is not just your personal name but as noted above you will still be liable for a range of outcomes.
Starting a business of any kind means you will need basic documents for your interaction with the outside world.
This list is a basic set of documents that we provide to clients for good risk management: