If you’re asking why hire a startup lawyer, the short answer is that most legal problems in a startup go back to decisions made in the first few months: how the company is set up, who owns what, what contractors sign, and whether your business name can be protected. These are usually cheaper to get right at the start than to fix once investors or a buyer are looking at them.
This guide covers the legal steps most Australian startups face early on, what tends to go wrong at each one, and where a startup lawyer is worth bringing in. It is general information, not advice on your situation.
1. Setting up the company
Many startups operate through a proprietary limited (Pty Ltd) company. A company is a separate legal entity. It can own assets, sign contracts, take on debt, and sue or be sued in its own name.
Shareholders are generally not liable for the company’s debts beyond any amount unpaid on their shares. Directors are in a different position: they can be held personally liable if they breach their legal obligations (business.gov.au).
A company also comes with ongoing obligations. You need to comply with the Corporations Act 2001, pay an annual review fee to ASIC, update ASIC within 28 days of key changes to company details, and lodge a company tax return each year. Every director needs a director ID, and the company must register for GST once turnover reaches $75,000.
A proprietary company can have no more than 50 non-employee shareholders (ASIC).
You can register a company with ASIC yourself. Where a lawyer helps is in the decisions around it: whether a company is the right structure, what the constitution says, who holds shares from day one, and making sure nothing the business depends on (a domain, code, a trade mark) is sitting in one founder’s personal name.
Approached Mark when we were starting our company. He was personable, provided great advice, hit our timelines and was really fair with his pricing.
Tom Fleming · Google review
2. Agreeing ownership between co-founders
If there is more than one founder, a shareholders agreement is the document that sets out each shareholder’s rights, obligations and how decisions get made.
Without vesting or leaver terms, a co-founder who walks away six months in usually keeps every share they were issued. The founders who stay then carry the work while someone outside the business owns part of it.
Terms most founder agreements deal with:
- Vesting: shares are earned over time. A common structure is four years with a one-year cliff, meaning nothing vests until the first anniversary.
- Good and bad leaver: what happens to a founder’s shares if they leave, and at what price.
- Decision making: which decisions need a board vote, and which need every shareholder to agree.
- Pre-emptive rights: existing shareholders get the first chance to buy new shares, which protects them from being diluted without notice.
- Drag-along and tag-along: how a sale of the company works when some shareholders want to sell and others don’t.
- Deadlock and disputes: what happens when founders can’t agree, before it reaches a court.
3. Raising money from investors
Raising money by issuing shares is regulated under Chapter 6D of the Corporations Act. A proprietary (Pty Ltd) company can raise funds from its existing shareholders and employees, and from the general public only where the fundraising does not require a disclosure document such as a prospectus (ASIC). In practice, that means most early-stage raises rely on one of the exemptions from disclosure.
Two exemptions come up most often for startups (ASIC):
- Small-scale personal offers: a personal offer, where offers have gone to fewer than 20 people in the previous 12 months and the new offer won’t take the amount raised in that 12 months above $2 million. You must not advertise the offer when relying on this exemption.
- Sophisticated and professional investors: offers to people presumed not to need disclosure because of their financial capacity, experience or wholesale status.
ASIC’s own guidance says to get legal advice on whether an exemption applies to you. Check any public posts, pitch-event material or emails about the raise against ASIC’s restrictions on advertising and cold calling before they go out.
A priced equity round generally involves a term sheet, a share subscription agreement and an updated shareholders agreement. Before signing, founders should understand the valuation, how much control investors get (board seats, veto rights over future decisions), and what investors are entitled to in a later round or on a sale. Our capital raising lawyers review these terms before they are locked in.
We used Lazarus Legal for a capital raise and some related corporate work, and they were excellent from start to finish. Straight-talking, responsive, and commercially minded…
James Burnett · Google review
4. Hiring employees and contractors
Minimum pay. All employees in Australia are entitled to a minimum wage. For most employees it is set by the award that covers their industry or occupation. The National Minimum Wage applies to employees who aren’t covered by an award or registered agreement. Rates are reviewed each year, and most changes start from the first full pay period on or after 1 July. The Fair Work Ombudsman has a Pay and Conditions Tool for checking award rates.
Unpaid work. Some unpaid arrangements are lawful, such as vocational placements that form part of a formal course. If the person is actually working as an employee, they are entitled to pay and conditions under the Fair Work Act, whatever the arrangement is called (Fair Work).
Contractors. Whether someone is a contractor or an employee depends on the working relationship: who controls how the work is done, who carries the financial risk, who supplies the tools, whether the work can be delegated, the hours, and whether ongoing work is expected. Since 26 August 2024, the Fair Work Act test looks at the real substance, practical reality and true nature of the relationship, including how the arrangement works in practice, not only what the contract says.
Having an ABN or sending invoices does not on its own make someone a contractor. Knowingly or recklessly telling an employee they are a contractor is sham contracting, which is illegal under the Fair Work Act (Fair Work).
Put it in writing. An employment agreement must be consistent with the National Employment Standards. For employees and contractors alike, the agreement should deal with who owns the work they create, confidentiality, and any restraint after they leave. If you already have agreements in place, an employment agreement review will show the gaps.
5. Making sure the company owns its intellectual property
In Australia, employers own the IP their employees create in relation to the business. Contractors are different. IP created by a contractor belongs to the contractor unless the contract says otherwise (IP Australia).
That matters for the work startups most often outsource: code, websites, designs and logos. Have a written contract that assigns IP to the company signed before the work starts. The same applies to anything a founder built before the company existed. It stays with that founder until it is assigned to the company in writing.
IP created by a contractor belongs to the contractor unless the contract says otherwise.
If you have an invention, IP Australia’s advice is to keep it confidential until you have applied for a patent or decided on another option (IP Australia):
- Have anyone involved in developing it sign a non-disclosure agreement.
- Don’t demonstrate, sell or discuss it in public, or post it online.
- If it has already been made public, Australia gives you a 12-month grace period to file a standard patent application. Not every country has a grace period, so an early disclosure can limit your options overseas.
- An Australian patent only protects you in Australia.
- A provisional application gives you 12 months to decide whether to go ahead with a standard application.
For drafting and filing a patent application, IP Australia suggests considering a registered patent attorney.
Bring your share split, contractor agreement or term sheet to a first conversation and find out what needs fixing before you sign.
6. Protecting your brand name
Registering a business name does not give you exclusive rights to it, and it does not stop someone who has registered the name as a trade mark from using it. A registered trade mark gives you exclusive rights to the name throughout Australia, for an initial period of 10 years (business.gov.au).
A trade mark can be words, shapes, images, sounds, colours, moving images, aspects of packaging, or a combination of these. Most trade marks are registered as words in plain font because that gives broad protection. Many businesses register the words and the logo as separate trade marks, so the words stay protected even if the logo changes (IP Australia).
Check the name before you spend money on branding. IP Australia’s Australian Trade Mark Search and TM Checker are free, and our guide to trademark searches explains how to use them.
An existing mark that is similar, for similar goods or services, can block your application, so it is better to know before launch. A trademark lawyer can run a fuller search, choose the right classes and respond if IP Australia raises an objection.
We had a great experience working with Lazarus on our trademark applications. The team was knowledgeable, responsive, and made the process straightforward from start to finish.
Gracie Smith · Google review
7. Offering shares or options to staff
Startups often use shares or options to attract people when cash is tight. Shares or options given to employees in connection with their employment come under the employee share scheme (ESS) tax rules.
The tax system has a start-up concession that can reduce the tax employees pay on ESS interests, if the company and the offer meet the eligibility criteria. Employers also have reporting obligations to their employees and to the ATO (ATO).
Whether the concession applies depends on how the plan is set up, so get the plan documents and valuation right before any shares or options are issued.
When to bring a startup lawyer in
You don’t need a lawyer for every step. These are the points where getting advice first usually saves money later:
- before shares are issued to co-founders
- before a contractor or agency starts building your product, website or brand
- before you settle on a name and pay for branding
- before you talk to investors or sign a term sheet
- before you hire your first employee
- before you sign a customer, supplier or partnership contract you can’t easily get out of
Frequently Asked Questions
Do I need a lawyer to register a company?
No. You can register a company with ASIC yourself. A lawyer is useful for the decisions around it: whether a company suits you, what the constitution says, how shares are issued and what the founders agree between themselves.
Can I use templates instead?
Templates can work for simple, low-risk documents. For founder shares, investor terms and IP assignment, the terms that matter are specific to your business, and a template won’t tell you what it has left out.
How much does a startup lawyer cost?
It depends on what you need done and how complex it is. Our guide to startup lawyer fees explains how pricing usually works.
Is this article legal advice?
No. It is general information about Australian law. Get advice on your own circumstances before acting on it.
I’ve used Mark and his team for multiple businesses from a tech start up to more established businesses. Mark has advised on employee contracts, shareholders agreements, trade marks and more.
Carly Shamgar · Google review
Talk to a startup lawyer
The first conversation is easier if you bring whatever you are working on: a proposed share split between founders, a contractor or employment agreement you haven’t signed yet, an investor term sheet, or the name you want to trade under. Lazarus Legal can review it and tell you what needs fixing before you commit.
We work with founders on company set-up, shareholders agreements, capital raising, employment agreements and trade marks. Call (02) 8644 6000 or visit our startup lawyer page. Our office is at 1/422 Oxford St, Bondi Junction.
