The thought of starting a new business can be both exciting and overwhelming. There are many things to deal with and it can be hard to know where to start.
This guide will provide an introduction to some of the main things to keep in mind, so that you can get up and running as soon as possible.
Before you and your co-founders (ie your business partners) dive in and commit your time and money to each other, it is important that you all have a clear idea of what is expected of each of you. You should be clear about each of your roles and responsibilities as well as the level of investment that each of you will make, and the proportion of the business that each of you will own. You should make sure you are all on the same page regarding what share of profits each of you will be entitled to, and how you will resolve disagreements.
This should not be a complicated task. It simply requires you and your co-founders to have an open discussion about each of these matters, and to record the details in a written document. But failing to do this is setting yourself up for problems down the track. Many businesses have failed, and business relationships have been destroyed, simply because the co-founders failed to discuss these matters ahead of time.
We have an Agreement Between Co-Founders (Non-Binding) which is designed to help you with this step. It is a relatively straightforward document and is not legally binding, so there are no penalties for failing to comply with it. But if you work through it with your co-founders, it will help you address various important matters and to clarify who will do what, and who will be entitled to what. This document is a great way to avoid conflict along the way.
Another important preliminary step is to spend some time on a business plan.
A business plan addresses things such as your target market, main competition, target customers, point of difference, pricing, marketing and strategies for growth and development and so on.
By spending some time to work through this, you may discover significant problems with your idea. If this is the case, you can count it as a blessing because it is better to know these things early rather than wasting time and money working them out.
However, through writing your business plan, you may also learn things that help you to work out your next steps. For example, you might identify particular challenges that you are going to need to overcome, and that require additional fundraising. Or you might identify a particular region or demographic where you should focus your initial efforts.
Your business plan is not a rigid or a legally binding document. Once you have written it, you are still able to make changes to it or to deviate from it. You can update it as you move forward and as you learn new things. But planning is an important step, and putting it in writing is a good way to make sure that you don't miss things.
At the same time, it is important not to get stuck at the planning stage. "Analysis paralysis" is a common trap for entrepreneurs - whereby they rewrite their plans over and over again, fooling themselves into believing that they are making progress. But there is always going to be an element of uncertainty, and at some point you are going to have to step off the ledge. So once you have done some research and have written your plan, take action.
Rather than spending several months and thousands of dollars creating your ideal end product, think about what sort of minimalist version of your product you might be able to create instead. This is often referred to as a "minimum viable product", and is a strategy that many businesses use to start testing their idea on real customers as soon as possible.
For example, if you are launching a meal preparation app, you could spend tens of thousands of dollars and a number of months building the app, complete with all the bells and whistles. Or you could launch a meal preparation service, by printing paper flyers and posting them on noticeboards around your town, or by posting on Facebook and Gumtree.
Obviously the app gives a better user experience, and is where you want your business to end up. But the simple meal preparation service could be launched in a single evening, and could give you immediate feedback about whether people in your area are actually interested in paying for meal preparation, and what sorts of meals or services are most popular. From there you can start refining your idea and you can make much more informed decisions about how to spend your money and how to develop your business.
There are many ways to test a minimum viable product and for some types of product it is easier than for others. Regardless, this is an important early step and can help to save you from heading too far down the wrong path early on.
The Australian Securities and Investments Commission provides a search function for checking business name availability. If you have a business name in mind, you can use this platform to see whether the name has been registered by anyone else. If it has, then you will be unable to use it. If the name is not in use, then you may register it to make sure that nobody else starts using it.
Please note also, that this search only relates to business names in Australia. If you are planning to operate internationally, then you will need to conduct similar searches in each country where you plan to operate.
If you are planning to have a website for your business, then it is important to note that a business name and a domain name are two different things.
If you have confirmed that your desired business name is available (using the link in the previous step), there is still a possibility that a corresponding domain name is not available. Therefore it is important to search for domain name availabilty. There are many platforms that offer free searches, such as Godaddy or Bluehost.
There are a lot of factors to consider when choosing a business structure. We have outlined many of these considerations in a separate guide called How to Choose the Best Legal Structure for your Business.
The most common structures in Australia are sole trader, partnership, company and trust. These are also discussed in more detail in that same guide. Take some time to go through that guide and consider your own situation.
Once you have chosen an appropriate structure, you will need to establish it. If you have any uncertainties about how to proceed at this stage, it may be necessary to seek legal assistance.
Depending on the nature of your business, there are various legal documents which you will probably need. We have many of these documents available for download.
In reality, there are many different documents which you may need, and many that you may be able to do without. However, it is important to get these organised before you deal with any customers. Each of our documents comes with an explanation of what the document does, so spend some time going through them and seek legal advice if necessary.
Your needs in relation to this matter will depend on the nature of your business. Obviously, some businesses in high risk industries have a greater need for insurance than others.
However, some common types of insurance that you may need to consider include public liability insurance, building insurance, and professional indemnity insurance.
In a lot of industries in Australia, various permits and licences are required. Some common examples are liquor licences, food business licences, import or export licences or Australian Financial Services Licences (AFSL). You probably even need a licence if you intend to play copyrighted music in your business.
There are many different kinds of business licence in Australia. The actual licences which you need for your business will depend on your location, your business type, and your business activities.
The Australian Government's Business website provides further information and allows you to search for any licences or permits that you need (if any). If in doubt, seek legal advice.
Once you get to this stage, you have got most of the preliminary issues out of the way. You may be ready to dive into your business. If you are opening a restaurant, you might be ready to start redecorating the premises. If you are releasing a website, you might be ready to build it and show it to the world.
There is obviously a lot more to do once you get to this stage, and the requirements always vary from one business to the next. You may need to speak to a lawyer to make sure you have everything covered, before you open the doors. However, we hope that this guide has given you a bit of an idea of what is required from a legal perspective.