New Year’s resolutions for your business - things you should do to start 2018 off right
It wouldn’t feel right to start the New Year without first making a few resolutions. While many people make New Year’s resolutions related to their personal goals, it is also an opportune time for businesses and business owners to identify potential risks and opportunities for continued growth to ensure the success of their business in the year ahead.
To start off the year on the right track, we have outlined a few important matters that we recommend businesses review before the busyness of the year sets in.
Understand your business structure
Many small businesses start out as sole traders where the individual running the business is legally responsible for all aspects of the business. This is the simplest and least expensive business structure as it only requires you to lodge a personal income tax return and your personal bank account can be used for any income earned. However, as businesses grow and change, the structure often needs to change in response to the changing needs of the business. The beginning of a new year is a good time to review your business’ structure to determine whether it is meeting the needs of the business. The most common types of business structures in Australia are sole trader, partnership, company and trust.
To ensure you select a structure that best suits your business needs and to understand the obligations, advantages and disadvantages associated with each structure, it is important to obtain professional advice when changing or reviewing your business structure. For example, your business structure can determine how much tax you pay, your potential personal liability and whether you are considered an employee or owner of the business.
The relevant agencies in your state or territory will need to be notified of any change to your business structure as well as the Australian Taxation Office (ATO), your bank, creditors, suppliers and employees. You may also need to notify Australian Securities and Investments Commission (ASIC) if you have made any of the following changes:
- appointed new officers (director or secretary);
- changed your business’ registered address; or
- current officers resigned or moved.
Update terms of trade
In November 2016, the unfair contract terms provisions of the Competition and Consumer Act 2010 (‘the Act’) were extended to apply to small businesses. Since then, the Australian Competition and Consumer Commission (ACCC) has already enforced the new provisions against JJ Richards & Sons Pty Ltd where the Federal Court held that 18 terms contained within their standard form contracts with suppliers were unfair and therefore declared void. To avoid such consequences, businesses should always consider updating their terms of trade and business practices with suppliers, manufacturers and third parties on a yearly basis. This will ensure compliance with the Act and will protect your business interests in the long term.
Review employment agreements
For any business, a proper review of employment contracts to ensure they meet the National Employment Standards (NES) and the relevant provisions of the Fair Work Act 2009 (Cth) is imperative. The NES standards are applicable to all employment contracts and, with employee awards, provide a minimum safety net of terms and conditions of employment. Employment contracts need to be regularly updated to ensure they reflect any regulatory changes.
For businesses employing executive staff or senior staff who are likely to have higher access to confidential information, any standard non-solicitation clause or restrain clause in an employment contract should be updated to ensure it adequately protects the interests of the business. It is increasingly common for courts to hold standard restrain clauses invalid as usually these clauses fail to protect legitimate business interests.
Assess cash flow
Last but not the least, to avoid potential liability for insolvent trading under the Corporations Act 2001 (Cth), it is important for directors and officers of a company to assess and protect their business’ cash flow. As many will be aware, directors who have acted honestly and for a proper purpose with a degree of care and diligence as is reasonable in the circumstances, will not be personally liable for insolvent trading. This involves assessing the cash flow and devising one or more courses of action that is likely to lead to a better outcome than placing the company under administration.
By taking the time to review these important business matters and setting resolutions for the future advancement of your business, you will be giving your business the best chance to achieve your most successful year yet.
At DSS Law, our lawyers have a wealth of experience in advising a broad range of business clients including sole traders, partnerships, private companies, listed companies and trusts.
Our team can provide you with advice on your business structure and ensure you comply with the relevant regulatory requirements. We regularly draft and negotiate contracts for large and small businesses and can assist you in reviewing your supply contracts and terms of trade to ensure that your business interests are protected. This includes reviewing and updating the business payment terms to reduce the risk of debtors and maintaining a consistent cash flow.
We also provide businesses with employment advice and can assist in ensuring your business devises a proper course of action to avoid potential liability for insolvent trading.
DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on 1300 DSS LAW or firstname.lastname@example.org.