If you run a business, you will face many challenges and opportunities whether you are starting out, growing, or facing a legal dispute. No matter what stage you are at in your business journey, it is important to be guided by professionals. We provide quality support and legal advice for a range of business matters.

Buying or selling a business

It’s easy to get caught up in the excitement of starting a new venture or moving on with the next chapter of your life. In doing so, it’s also easy to overlook important ways to protect your interests and deal with a range of potential issues that may not be apparent from the outset. For example, whether incidental agreements required for your operations (i.e., a commercial lease) will be suitable; how intellectual property (i.e., trademarks and domain names) will be transferred; and what happens to any existing employees of the business. Obtaining professional advice can help flag important matters, protect your rights, and facilitate a smooth transaction.

Negotiations for the sale/purchase of a business should always be formalised in a written contract. The contract should clearly set out each parties’ rights and responsibilities and deal with matters such as:

• the purchase price, apportionment of goodwill, stock, plant and equipment
• GST and other taxation matters
• transfer of leases, licences, service agreements, etc.
• ownership and transfer of intellectual property such as business names, domain names, trademarks
• employee matters – transfers, redundancies, leave and other entitlements
• training periods, confidentiality and restraint of trade provisions
• representations and warranties
• due diligence, inspections, investigations

Types of business structures

The structure you choose for your business generally depends on matters such as the scale of your proposed operations and your plans for future growth, the industry in which you operate, and your financial and personal circumstances. We can help you choose a structure that fits your needs. Typical business structures in Australia include:

Sole traders

Sole traders (or sole proprietors) operate their businesses as individuals which can be a cost-effective structure for a single person business. There are two key considerations:

• Sole traders are solely responsible for the operations of the business, including any legal and financial liabilities incurred.
• All income from the business will be treated as personal income and taxed at the relevant personal income tax rates.

Partnerships

Partnerships are relatively simple business structures to set up when two or more individuals contribute to and run a business together. A potential downside is that ordinarily each partner will have unlimited liability for any debts incurred through the partnership, no matter which ‘partner’ incurs the debt. A partnership agreement is essential to govern how the partnership operates, arrangements for profit sharing, termination, retirement, handling disputes, or sale of the business, etc.

Company

A company structure enables a business to be set up as a separate legal entity to its officers. The company can enter agreements in its own name and any income is earned by the company and not the individuals involved. This may result in a more beneficial tax rate than if earnings are classified as personal income.

Companies are regulated by the Australian Securities and Investments Commission (ASIC) and have specific reporting requirements. Company directors also have several common law and statutory duties.

Trusts

A trust is a structure that holds property or income for the benefit of others. Trusts may help minimise individual risk, protect assets and beneficiaries, and provide flexibility in distributing income and property. Structuring and managing a trust can be complex – they must be compliant and effectively administered to ensure they deliver their objectives.

Commercial leasing

A commercial lease governs the relationship between a lessor (landlord) and lessee (tenant) regarding the lessee’s right to occupy commercial premises to run its business. The lease agreement should be in writing – terms should be balanced and reasonable and each party should obtain independent legal advice to ensure the provisions are suitable for their needs.

Typical lease terms include:

• Area to be leased – a legal and physical description of the leased premises including the use of facilities such as carparks, storage, amenities, and other common areas.
• Term of the lease – clearly detailed terms and renewal options that should coincide with the respective parties’ business and investment objectives.
• Rent and outgoings – including the method and time for reviewing rent and any outgoings payable by the tenant.
• Permitted use – allowing for the tenant’s intended use which may need to consider any proposed growth in business activities.
• Fit-out and refurbishment – permitted fit-out if relevant, who is responsible for costs and installation, whether fixtures may be removed at the end of the lease and any refurbishment obligations when the lease expires.

The Retail Leases Act 2003 (Vic) applies to leases for defined retail premises and imposes certain rights and obligations on the parties. This includes restrictions on recovering certain outgoings and contributions from tenants. Lessors must also provide specified disclosure material when offering to rent retail premises. Failing to comply with these requirements can have dire consequences for a landlord.

Commercial leasing disputes sometimes arise because the parties are not fully aware of their rights and responsibilities, or the terms of the lease are incomplete or unclear. Obtaining legal advice from the outset can help put the parties on the same page and minimise potential disputes down the track.

If you need assistance, contact [email protected] or call 03 9505 4999 for expert legal advice.