Setting up and running a business is an all-consuming effort in which perfecting the product and the method of selling it is the first and most important priority. Unfortunately, that laser focus on establishing the company in the marketplace can sometimes leave other elements of building a business neglected.
One of those elements is the legal risk that exists in every business. From employee contracts to workplace policies, intellectual property protections, privacy policy and regulatory compliance, ignoring legal risks can prove costly and even fatal to a business’ viability.
In this post, let’s look at seven common legal risks a business should urgently address to defuse any ticking time bombs. Ignoring these issues can end in financial and reputational loss. If in doubt, seek the guidance of professional business lawyers with expertise in advising businesses about the gamut of legal issues they face.
1. Legal and tax implications of your business structure
The legal and tax environment in which the business operates is shaped by its structure, a company being a separate legal entity from those who found and run it. The difference between the obligations of a sole trader, a partnership, a trust or a limited liability company are substantial and often, business owners need guidance from a legal professional and a financial consultant to understand what is entailed in their business structure. A clear ownership structure, set out in a partnership or shareholders’ agreement, for instance, is crucial to avoid later legal problems should a dispute or disagreement arise.
2. The importance of intellectual property protections
In this day and age of internet start-ups, where a business can be created in the online environment almost overnight, protection of intellectual property is becoming increasingly important. Contractors and freelancers who do work for the business may also try to claim ownership of assets they created, or helped create, despite being commissioned by the business.
Logos, patents, copyright material and other intellectual assets of the enterprise should all be formally documented as belonging to the business as protection against rival claims of ownership or theft and appropriation of the assets. A related reason to urgently address this legal risk in any business is that the intellectual property assets of the business are part of its overall valuation (in some businesses, the most valuable asset), and will be one of the first things looked at by any potential buyer of the business in the future.
3. Privacy policy
Once it was a novelty, now a website is an essential for any business, helping consumers find its services and products via search engines and often encompassing an e-commerce component to more conveniently serve its market. But any business needs an easily accessible privacy policy somewhere on its site, under Australia’s Privacy Act 1988, informing those who visit what information is being collected from them, how it’s being collected, how it will be used and who it is being shared with. Failure to abide by this simple but seemingly insignificant legal risk can become costly and drawn-out if the business becomes the subject of legal action.
4. Legislation and regulation
Compliance with laws and regulations that affect a business can be a challenging task, particularly as new legislation is created and older statues are updated. It’s always advisable to take a proactive approach in understanding legislation affecting your business to avoid the complications that come with being in breach of the law. Ideally this is done with professional advice from qualified lawyers who can help key employees understand their rights and obligations under relevant laws. This is a vital process if the business is the subject of legal action over non-compliance with any area of law, from intellectual property infringement to adhering to environmental regulations and the Australian Consumer Law.
Speak with professionals who can highlight risks and help address them
At Big Law, we have legal specialists who can help identify and address the legal risks briefly outlined in this article. While some of the issues involved seem large, unwieldy and time-consuming, it’s not worth ignoring or putting off dealing with legal risks. Call us today to discuss any of the topics raised in this post.
