From Incorporation to Licensing: A comprehensive Guide to the Legal Requirements for Registering a Start-Up Business in Australia
1. INTRODUCTION
Before starting up any business, it is super important to understand the legal requirements for a start-up, FMCG or SME. Compliance with local, national, and international laws and following regulations across the board can help avoid fines, penalties, and legal action down the track. It’s a no-brainer.
Additionally, understanding your legal requirements can protect your startup/company assets and intellectual property and ensure that contracts or agreements are legally binding. Furthermore, it can also help your business to avoid any legal disputes which can empty the bank of any profit, quickly become a drain on company resources and dare we say, flipping time-consuming.
When setting up shop, it is vital to seek professional counsel and work towards establishing a company’s legal framework from the get-go; ensuring it is compliant with all relevant regulations and is set up for long-term success.
2. BUSINESS STRUCTURE
A new business could include any of the following:
Sole trader: This is the simplest and most common form of business structure in Australia. A sole trader is an individual who owns and operates the business and is personally liable for all debts and liabilities.
Partnership: A partnership is a business structure in which two or more people share ownership and management of the business. Partners are jointly and severally liable for all debts and liabilities of the partnership.
Company: A company is a separate legal entity from its shareholders, and is generally considered the most complex business structure. Companies are required to be registered with the Australian Securities and Investments Commission (ASIC).
Cooperative: A cooperative is a business structure in which the members collectively own and control the business. Cooperatives are typically used for businesses that provide a service or product to the members, such as a credit union or a retail store.
Superannuation fund: Superannuation funds are used to provide retirement income for members, also known as self-managed superannuation funds (SMSFs).
3. TAXATION LAW
There are several tax considerations for start-ups in Australia, including:
GST: Most businesses with a turnover of more than $75,000 per year are required to register for and charge Goods and Services Tax (GST) on their sales.
Income tax: Start-ups will need to register for an Australian Business Number (ABN) and a Tax File Number (TFN), and will be subject to income tax on their profits.
Payroll tax: Employers are required to pay payroll tax if their total Australian taxable wages exceed a certain threshold, which varies by state.
Capital gains tax: Start-ups may be subject to capital gains tax when they dispose of assets, such as property or shares.
Research and Development (R&D) Tax Incentive: Eligible companies can claim a tax offset for R&D expenditure, which can be significant for start-ups.
Tax Incentives that require legal understanding
There are also tax incentives in Australia that are designed to encourage certain activities depending on the set-up of your start-up /or fledgling business and it is important for companies to understand and comply with the legal obligations associated with these incentives to ensure they can access the benefits offered.
Here are a few examples.
- The Research and Development Tax Incentive (RDTI) is available to eligible companies that are conducting research and development activities in Australia. It provides a tax offset for eligible R&D expenditure and can be used to offset the cost of developing new products, processes or services. To be eligible, you must ensure your R&D meets the R&D definition under the required legislation.
- The Early Stage Innovation Company (ESIC) tax incentive provides a range of tax concessions for eligible companies that are working on new or innovative products, services or processes. It allows for a reduced tax rate on capital gains, tax exemptions on certain types of investments, and access to other tax concessions. To be eligible for this incentive you need to be incorporated, but not listed on the ASX, meet conditions related to your innovation activities and have an income of less than $20 million.
- The Entrepreneurs’ Infrastructure Programme (EIP) provides funding and support to eligible small businesses and start-ups to help them grow and commercialise their products, services and processes. This program can help with funding for research, development, and commercialisation of new ideas. To get funding for the EIP, you need to be a SME with a business objective that aligns with the program’s objectives and follow the legal guidelines for accessing funding and support.
4. EMPLOYMENT LAW
In Australia, employers are required to comply with a range of federal and state laws when hiring employees. These include providing a minimum wage, leave entitlements, and non-discrimination protections. Additionally, employers are required to create and maintain a safe working environment for their employees.
The Fair Work Act 2009: This federal law sets out the minimum standards for employment in Australia, including minimum wages, leave entitlements, and non-discrimination protections.
The National Employment Standards (NES): This set of minimum employment standards that apply to all employees in Australia, regardless of the type of employment or the industry they work in. These standards include annual leave, personal/carer’s leave, compassionate leave, community service leave, and long service leave.
Anti-Discrimination laws: Employers are prohibited from discriminating against employees over certain attributes, including race, sex, age, and disability. Employers are also required to take reasonable steps to prevent discrimination, harassment, and bullying in the workplace.
Work Health and Safety laws: Employers are required to ensure the safety of their employees in the workplace. This includes providing a safe working environment, adequate training and supervision, and procedures for responding to incidents and accidents. Employers must also comply with specific safety regulations in their industry.
Industrial Relations laws: Employers need to be aware of the industrial relations laws that apply to their industry, including the terms and conditions of employment, including the rights and obligations of employers and employees concerning employment
5. INTELLECTUAL PROPERTY
There are several different types of intellectual property (IP) rights recognized under Australian laws, including:
Copyright: This protects original literary, dramatic, musical, and artistic works, as well as films, sound recordings, and broadcasts.
Trade marks: Trade mark signs, logos, and symbols are used to distinguish goods and services from those of others in the marketplace.
Patents: This protects new and innovative products, processes, and technologies.
Designs: This protects the visual appearance of a product, including the shape, configuration, pattern, or ornamentation.
Plant Breeders’ Rights: This protects new plant varieties.
Circuit layouts: This protects the layout of integrated circuits.
Confidential Information: This protects information that is not generally known and would be of commercial value if it were generally known.
Conclusion
The merits of legal compliance for a start-up cannot be overemphasized and entrepreneurs need to familiarize themselves with the laws and regulations that apply to their various enterprises. This includes understanding the registration and compliance requirements for taxes, licenses, and permits, as well as laws related to employment, consumer protection, and intellectual property. By complying with legal requirements, entrepreneurs can set their startups on a path to success and avoid potential legal issues down the road.
Failure to comply with these laws can result in significant financial and legal consequences for the business and its owners. Entrepreneurs are advised to seek professional legal advice if they have any doubts or questions about the legal requirements for starting a business in Australia. With all that said, nothing happens until you start your adventure, so get your hustle on and make it happen.
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Mark Lazarus
Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.