5 Legal Issues That Small Businesses Encounter
It’s not always easy to keep up with legal issues when you’re running a small business. The legal landscape is constantly changing, and it can be difficult to know what your legal rights are in relation to the legal obligations that you owe as an employer or a consumer.
To help you figure out what legal issues to be mindful of, we’ve compiled a brief summary of some legal topics that small businesses may face.
1. Licensing and Business Registrations
A small business owner has to get a license before they can operate legally. It’s easy for these obligations to be overlooked when there are so many other things that need attention, but it is important for you to know what licenses your company needs and where the paperwork should go in order to avoid any legal repercussions down the line.
If you conduct business in Australia, it’s likely that not only will you need to comply with tax obligations but also register for them. Rules may vary depending on the nature of your operation and industry sector. You will be required to register for:
- Australian Business Number (ABN). An Australian business number, or ABN for short, is a unique nine-digit identifier that can be obtained by applying to the Australian Taxation Office (ATO). Operating an unregistered company in Australia could result in hefty fines and penalties should you get caught! Registering with the government will also ensure that your company remains compliant with all of its obligations under tax law.
- Goods and Services (GST). GST is an Australian tax. GST will be charged on most products and services that Australians buy or sell from their revenue. The value-added component of the total price which comprises all goods and services in a transaction must include 10% as part of its final amount to account for GST’s presence within these transactions (which can also result in it being called ‘input tax’).
- Tax File Number (TFN). TFN has been used by Australians since 1973 as an identifier that is linked to their personal information, including bank account details and other financial records. When the Australian government first created this numbering system, it aimed at simplifying how people could file taxes without having tedious conversations about every single part of your finances each year you filed them.
- Pay as You Go (PAYG) Withholding. PAYG is a system of withholding taxes in Australia. Taxpayers declare their income and the tax due is collected through regular payments from an employer or pension provider, rather than on receipt of payment as with traditional Pay As You Earn (PAYE) taxation systems. The advantage to PAYG taxpayers is that they are not required to make any additional payments at year-end when preparing annual returns for other sources such as shares trading, property investment activity, etc., which can be confounded by changes in market values during the course of the financial year.
Other optional registrations include:
- Business name. Registering your business in Australia is a great opportunity to set up shop with an Australian company. You can choose from the various types of registration, including sole trader and partnership businesses, as well as register under one or more individual/sole traders. There are also opportunities for registering certain companies outside of these categories like trusts and corporations which may be beneficial depending on what type of work you do.
- Trademarks. Trademarks in Australia are a product of many sources. Australian trademark law is governed by both federal as well as state legislation which sets out guidelines for registration to protect consumers from fraud or confusion when purchasing goods with certain similarities that may be seen on other products.
- Website Domains. If you create a website, it is important to register your domain in Australia. Registering an Australian domain will display the .au at the end of every address which guarantees visitors from all over that their browsing experience and information they are submitting online will remain private.
2. Employee Termination
One of the worst parts about being a boss is having to fire an employee. It’s a difficult process when you have to let someone go, but it’s something that needs doing for both parties’ sake if they’re not working out or just aren’t qualified anymore.
To avoid legal trouble and save yourself some future headaches with payroll taxes, make sure you outline all terms in writing in an Employee Manual as well as document any disciplinary actions taken against them so there’s no question about what happened later on down the line.
3. Shareholders’ Agreement
A legal agreement is a must for any business with more than one shareholder. Without it, legal battles could ensue if the company splits up or gets sold and no plan was made beforehand. Even when everyone on the team is friends now, things can change in an instant – don’t leave anything to chance and ensure you get an experienced lawyer to draft this important document.
4. Overtime Disputes
If you are not careful, overtime payments can become a slippery slope. Make sure to have clear expectations for your employees and get approval from the right people before approving it in advance. This way you will be able to make informed decisions about how much additional money is being spent on payroll so that there won’t be any unexpected legal trouble ahead.
One way to save time and money on a legal dispute is by negotiating. Negotiating outside the courtroom could be an option for you if it’s feasible, so consider what will work best in your circumstance before rushing into suing someone.
Contact us today at Bouchier Khan Lawyers if you have questions or concerns about any legal issue. We can help guide you according to your business’ needs.