As a bare minimum, you should consult an accountant and lawyer to ensure you are meeting all of your legal responsibilities.
Due to the high regulation surrounding businesses, it is essential to be made aware of the legal issues when starting a business, some of which we will mention below:
• Plan, plan, plan– this cannot be emphasised enough. It is essential that you develop a business and marketing plan and seek advice from an expert in the field to ensure that you hit the ground running (more on this latter in the article);
• Select the business structure – taking into account the people involved, the protection required from personal liability and the tax implications. You need to consider whether you should:
- Be a sole trader – an individual who is responsible for the business' profits and losses.
- Form a partnership – a structure of two or more people to share the profits and losses together.
- Create a Company – a separate legal entity having its own legal and financial obligations.
• The Business Name – you should check the ASIC register to ensure the business name is not currently being used and if not, register the name and then seek an Australian Business Number (ABN) or Australian Company Number (ACN);
• Consider if any licences or permits are required and make the necessary arrangements to obtain them. You should ensure you are registered for GST;
• Arrange a shareholders agreement or partnership agreement to be drafted, as necessary;
• Ensure that a lease is in place for the business premises, place all staff on employment contracts and consider making formal arrangements with any third parties (i.e. suppliers);
• Secure the appropriate web site and email addresses to match your business name and then build distinctive desktop and mobile web site for the business;
• Protect your intellectual property including any logo or any unique system;
• Develop policies, procedures and an operational plan for the business. Whilst your employees may be family members, your business will run more effectively if you create such elements; and
• Establish a succession plan and exit strategy. This may be the last thought in your mind when commencing a business, but too often businesses are left in a state of complete chaos when a family member decides to leave or dies. Pre-planning is essential.
The best tip when commencing a business is to be properly informed and advised. Protect yourself and your business and ensure you are aware of the laws which apply to your business including but not limited to employee entitlements/work place relationships laws, work health laws, safety obligations, zoning, and privacy.
Now let's discuss some key planning elements.
Just having a good idea is not enough to be successful today. Understanding the external and internal environment is just as important. So consider some of the following in your planning:
A. Reasons for startup:
a. What do you really want your business to be;
b. What would your business look like;
i. Have you defined your objectives – Strategic .v. Operational .v. Financial;
1. Try to define the "where to compete versus how to compete" model for the business
ii. Who is your typical customer/client and what are their needs or wants?
iii. What is your mission statement?
iv. What is each Value Proposition (the unique benefit your product/s will provide customers/client segments);
v. Finally, what is your "Unique Selling Proposition (USP or market gap)" that the market will relate and be attracted to, more so than any competitor/s.
B. Have you conducted a detailed S.W.O.T. of your business? Include here potential substitute or new entrant considerations due to the on-going context in which your business will operate i.e. think about any political, economic, social/cultural, technological, legal & environmental potential impacts, short, medium and longer term that may affect the business;
C. Competitors
a. Who are your top three?
b. Define their customer segments. Are you going to target these segments as well?
c. Which competitor has grown faster than any other? Why do you think?
d. Why are your competitors good at what they do?
e. Can they do things better if they received some help?
f. What will set your business apart from them? Can your competitors copy you quickly, if so how?
D. Human Resources
a. Define the type of culture you would like to see evolve for your business;
b. Define a management framework you need:
i. How is the firm managed/led/directed. Which family members will do what? &
ii. How are strategic and operational (day to day) decisions made and who by?
c. What are your key Human Resource and culture policies/procedures?
d. How are people to be trained?
e. What is the recruitment, development, review, performance management and termination criteria that you will use?
f. What is the organizational structure including role definitions and credentials?
E. Technology information
a. What management information system will you use? Can it help you manage and understand all operational and financial elements i.e. information on clients, products, competitors, creditors, debtors, expenses, profit/loss etc;
F. Marketing
a. How are you going to inform your customer/client segments you are in business, what your USP, Value Proposition/s and contact details are?
i. Advertising – if so how?
ii. Personal meetings – if so who will do this?
iii. Other promotional elements – if so what?
All the above elements support the view that having legal, accounting, IT, HR and marketing support before during and after starting your family business will ensure you begin with the right structures, advice and then remain informed as the business grows and matures.
For more information and assistance in any of the above, please do not hesitate to contact Chelsea Winter, Commercial Lawyer or Mr Tony Hercok, Partner & Chief Operating Officer on 02 9635 4266.
