Legal Requirements for Business: 10 Major Requirements to Begin
One needs to consider thousands of things before deciding to start a business. If you have your sights set on becoming a business owner, congratulations. But, before embarking on your new venture, you need to follow the legal requirements to start one.
Here, we’ll share the 10 major requirements for starting a business. We’ll also discuss the requirements related to the business structure and answer common questions.
Table of Contents
- 10 Legal Requirements for Starting a Business
- Business Structure-Related Legal Requirements
- Key Takeaways
- Frequently Asked Questions
10 Legal Requirements for Starting a Business
Starting a business isn’t as easy as deciding to engage in your favourite pastime. You need to ensure your new company fulfils its legal obligations. Plus, your company should conduct business in line with the laws and rules prescribed by the Australian government.
Here are the top 10 legal requirements for starting a business in Australia.
Register Your Business
The first step towards starting a business is getting it registered. In Australia, you can’t start a business legally unless you have an Australian Business Number (ABN). This 11-digit number is unique to every registered business and serves as a government identifier. The registration process for an Australian business number is free, and you can complete it online.
You may also need to register for Goods and Services Tax (GST), Tax File Number (TFN), and Pay As You Go (PAYG) Withholding. This depends on the type of business you want to start.
The Australian government enables future business owners to register for a business name or a trademark at the same time. If you want to set up a website for your business, you’ll also need to register a domain name.
Follow Fair Trading Laws
When you sell products or services, you need to be aware of different fair-trading laws. These laws protect you, your company, and your customers from unfair trading practices.
The Competition and Consumer Act (2010) is the Australian law that regulates fair trading. Different regulations prescribe how Australian businesses must deal with their suppliers. These regulations also apply to dealing with customers and competitors. This law ensures that there’s fair trading between competitors and that the customers are always treated with respect.
The Competition and Consumer Act, also called the Act, covers unfair market practices, and industry codes. It also covers product safety, price monitoring, and regulations for particular industries.
The Act is a national law. But, each territory and state has its own rules and regulations businesses should follow.
Whether you’re starting a large or small business, you need to ensure your contacts are in order. Whenever you decide to do a job for someone else, you’re entering a commercial contract. Such a contract is legally enforceable even if you didn’t sign an official legal agreement. This means that you can pursue legal action against the contracting party if they fail or refuse to uphold their promise and vice versa.
Although contracts are valid even when they’re not in writing, it’s best to have all important matters on paper to prevent disputes.
Legally enforceable contracts need to contain certain elements:
- An offer and an acceptance of the offer
- An intention to form a legal relationship
Respect Privacy Laws
As employers, business owners have privacy obligations they need to meet. Privacy laws prescribe how businesses handle their customers’ personal information, emphasising data privacy. In 1988, Australia introduced The Privacy Act, which protects and promotes the privacy of individuals. This act contains 13 principles that apply to Australian government agencies and the private sector.
Make Sure You Follow the Rules for Imports and Exports
Businesses can’t import or export products unless they follow different government regulations.
Importing is bringing products into Australia while exporting represents selling products outside Australia. You can import and export if you follow all Australian laws and regulatory requirements.
For example, you can import low-value goods, software, or personal effects, free of taxes and charges. What’s more, you don’t even need a formal import declaration. But, importing requirements and pre-arrival reporting become more complex in certain cases. If you want to import goods worth more than A$1,000 or prohibited or restricted items, you’ll need to follow specific rules. The same goes for goods that represent a biosecurity risk.
When it comes to exporting, the regulations you’ll need to follow will depend on the product or service and the area you live in.
Since legal requirements vary depending on a particular product, it’s vital to check the rules and ensure you follow them at all times. You may also need to apply for specific licences to export or import a product.
Ensure That Intellectual Property Is Not Infringed
Intellectual property can be anything from an idea or creation to a name. Businesses that want to protect their intellectual property need to submit a formal application. They also need to pass a thorough examination.
But, before applying for intellectual property, you should check that it’s not already registered. The Australian government (IP Australia) allows anyone to search existing intellectual property rights. All you need to do is go to the government’s website.
Large and small businesses can register intellectual property themselves. They can also seek advice from a legal professional.
Make Sure You Comply With the Employment Laws
When employing people, you need to follow Australian employment laws. These laws protect the employees and require business owners to:
- Pay their employees previously agreed-upon wages
- Respect work health and safety regulations
- Have workers’ compensation insurance for all employees
- Respect regulations related to working with vulnerable people or children
- Respect each worker’s health and reputation and not act in a way that could cause humiliation or mental distress.
Know the National Anti-Bullying Laws
Bullying and harassment at work have legal risks. When employing staff, ensure to discuss appropriate workplace behaviour. Moreover, take extra steps to lower the risk of potential liability.
Examples of bullying at work are:
- Playing unpractical jokes
- Having unreasonable work-related demands
- Excluding an employee from work-related events
- Pressuring an employee to act inappropriately
Follow Environmental Protection Laws
Local, state, and federal governments in Australia administer different environmental protection laws. All large and small business owners need to follow them. Of course, not all laws apply to every business type. That’s why it’s vital to explore the laws and figure out how to manage environmental impact accordingly.
Environmental management has many benefits for a business:
- Saving money – Good environmental management leads to spending less money on materials, water, and energy. The same goes for waste management.
- Improved reputation – Many customers enjoy supporting a business that cares about the environment.
- Recovering resources – Recycling and reusing can be profitable.
- Work health and safety – Reducing waste and chemical usage can contribute to a safer and healthier workspace.
Both large and small businesses can take action to manage their environmental impact. Here are the steps for plain and prioritised environmental management:
- Get an environmental audit.
- Create an environmental management system (EMS).
- Track and report on your impacts.
- Understand which legal requirements apply to your business.
- Apply for awards and grants.
Be Aware of Legal Marketing Obligations
Certain legal requirements for starting a business relate to marketing.
Businesses advertise their products to reach their audience and attract more clients. The ultimate goal is enhancing profit.
When marketing products, large and small businesses need to follow different regulations. These regulations relate to advertising, spam, signage, licensing, and pricing.
Keeping a record of your expenses for tax purposes doesn’t fall within the legal requirements for starting a business. But, it’s just as important. Since, as a business owner, you have a lot of obligations, you should consider using accounting software like FreshBooks.
FreshBooks is an online accounting software that can help you automate everyday tasks. Thanks to this program, you can save time and focus on other aspects of your business.
This software can manage expenses and accounting needs. Through FreshBooks, business owners can create new, quick, and recurring expenses in only a few steps. Besides allowing you to manage expenses easily, this software can make invoicing and accepting online payments much easier. It can also help you with time tracking, managing clients, and double-entry accounting.
FreshBooks is available on both computers and mobile devices. Thanks to this, you can always stay on top of the latest changes and have detailed insight into your business.
Business Structure-Related Legal Requirements
When starting a business, you need to consider different business structures and decide which one you’ll use. There are several types of business structures, and here are the three most popular ones:
A sole trader represents the simplest business structure in terms of regulations and compliance. When you operate as a sole trader, there’s no separation between you and your business. This means that, as a business owner, you’re responsible for every aspect of your business, including debt.
With this business structure, there’s no limit on liability.
A partnership is when two or more people run a business together and receive income jointly. The partners share control and management and are responsible for potential liabilities. A partnership agreement is an agreement between partners to run a business together and share profits. A partnership agreement is common, but it’s not required by law.
Company (Pty Ltd)
Unlike a partnership or a sole trader, a company is a separate legal entity. Companies have different rights and can incur debt, sue, or be sued.
With companies, there’s a limit on liabilities. But, companies are also more complex than partnerships and sole traders. If you want to start a company, you need to prepare for higher set-up and administrative costs and more legal responsibility. Plus, you need to register the company with the Australian Securities and Investments Commission (ASIC).
Starting a business can seem challenging. You need to prepare different legal documents and consider business insurance. Plus, you also need to ensure you’re legally compliant and follow numerous laws. Even after completing all these steps and starting a business, there’s no guarantee it will succeed, which can be discouraging.
Accounting programs like FreshBooks and valuable information on the internet can help you start a business. Eventually, you may be able to achieve a high annual turnover.
FAQs on Legal Requirements for Business
What is the most important business responsibility?
It’s hard to say what the most important business responsibility is. Business owners have a responsibility toward customers, clients, and employees. They also need to be responsible toward stakeholders, partners, and the public.
Some say that the most important responsibility is providing good jobs and making quality products. Others state that providing exceptional customer service and correct feedback is more important.
Paying a fair share of taxes and operating in accordance with laws is also vital.
What are examples of compliance in business?
Compliance represents following regulations, rules, and laws different legal authorities prescribe. It’s important to mention that not all businesses follow the same compliance procedures. But, there are a few universal examples.
An example of compliance in business is obtaining a business licence for operating in a specific area. Other examples are paying taxes on time and maintaining employee documentation.
How do laws protect businesses?
Laws protect employees, customers, and businesses. The rule of law governs every aspect of business and informs business owners of what they need to do.
If a business follows all laws and regulations, it can resolve every dispute or issue without difficulty.
How do you ensure companies meet the legal and other requirements?
Ensuring companies meet legal and other requirements isn’t easy. But, it’s possible if you use the right strategies. The first step is identifying which local, state, and federal regulations apply to a particular company. Next, you should identify which requirements from those regulations are relevant. Then, consider how to put those mandates in place and create a plan. Document the processes that lead to meeting the requirements and keep the records somewhere safe.
Don’t forget that requirements often change. You need to keep track of the relevant changes regularly. If necessary, install updated procedures.