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Best Business Structure for Online Business

Best Business Structure for Online Business

by | Apr 23, 2017 | Business Structures, Law for Online Business, Legal

Best Business Structure for Online Business

Starting your online business

Starting your online business can be very exciting. One of the many things to think about is your business structure. It’s a great idea to think about these points to help you decide which structure best suits your needs.

  • why you are setting up your business
  • where the money is coming from
  • your long term goals for the business
  • the advantages and disadvantages of different business structures

Common business structures in Australia

It doesn’t matter where you are in the country now, the rules around your business structure will be very consistent across all the states and territories of Australia. The four most common business structures used by small businesses in Australia are:

Sole trader: You operate as the sole person legally responsible for all aspects of the business. As a sole trader you can still employ other people to help you run your business.

Company: A company is not you, it is a separate legal entity owned by its shareholders.

Partnership: Partnerships are formed by agreement rather than registration and are an association of people or entities running a business together. It is different to registering as a company.

Trust: A trust is usually formed by a Deed, but can be ‘bare’ or not documented. There are different laws that apply depending on where you are. The trust holds property or income for the benefit of others and is managed by a trustee.

**IMPORTANT NOTE: A registered business name, or even an unregistered trading name, is not a business structure. It is just a name. That business name might be used by you as a sole trader, your company, a trust you have set up, or a partnership. It is not a legal entity and provides no protection or separation between the person or entity that registers the business name, and the liabilities of the business.

Different Considerations for Business Structures

Things to think about before choosing a business structure for your online business include:

  • Are you making any money yet?
  • Cost to set up and maintain.
  • Do you have personal assets you’d like to protect and keep separate from business liabilities?
  • Are you looking for income sharing opportunities?
  • Do you want to attract outside investors into your business?
  • Would you like to be able to sell all or part of the business in the future?
  • Tax and other duties.
  • Are there future potential tax savings that could affect your choice?
  • The reporting and compliance obligations of the business structure you choose.

Different people have different priorities, so there is no ‘one size fits all’ approach to choosing your business structure. For example, if you are not making any money, your risk is likely to be low and it will be easier to operate as a sole trader. Once you are making more money than you can afford to lose, you might consider setting up a trust or a company to operate your business.

FAQs

Is it better to get my accountant or my lawyer to help me set up my business structure?

In every profession there are people with different levels of skills and experience, so it really depends upon the qualifications and experience of your advisers. Some accountants are great in their area, and some lawyers are too. Know what your goals are and ask your adviser how they can best help you to achieve your goals.

Don’t be afraid to ask if a proposed structure can be simpler! I’ve seen business structures that might have made sense at the time, but become burdensome later on and are impossible to unravel without huge cost.

Can I register a business name if I am a sole trader?

Yes! As a sole trader you can chose to operate under your own name with an ABN, like “Jeanette Jifkins, Solicitor” or you can chose to operate using a business name, like “Onyx Online Law”. You can register the business name against your sole trader ABN and then use that name in your small business. If you do use a business name, you need to register it.

Why should I register a business name for my online business?

It is an offence to operate a business under a trading name (other than your own name) if it is not registered. You can be fined up to around $5,400. You will need an ABN (Australian Business Number) before you can register a business name. Who ever has registered the ABN will be the person or entity behind the business name.

Business name registration is now managed by ASIC. You will need to set up an ASIC Connect account and login before you will be able to find a link to register a business name.

Is my domain name the same as my business name?

Your domain name might be your business name, and it might not. Probably the easiest way to work this out is to think about what name will be on the invoices you business issues. If the name on your invoices is the same as the domain name, then it will also be your business name. You will still need to register your business name, or establish a company with that name, even it is the same as your domain name.

If I have registered a domain name, do I have to register a business name?

Yes. Domain name registration has nothing to do with business name registration. You register a domain name with a domain registrar. You register a business name with ASIC.

Do I have to register my business name if it is the same as my company name?

No. Once you register a company name, no one will be able to register the same business name and you don’t need to register the same name as a business name. They might still be able to register a similar name by adding something like (Australia) to the name.

How do I find out if I can register my business name?

If you are worried about similar business or company names that are already registered, try reserving a company name through ASIC (it costs about $44). When you reserve the name it will be checked and you will be told whether or not you can have it, or if you need to pick another name.

What does ATF mean?

ATF means ‘as trustee for’ and is used when you name the trustee of a trust. The trustee is the legal ‘face’ of the trust. You can have a person or a company as trustee. In legal contracts and on financial documents you will need to use the full legal name of the trust. For example – Small Business Pty Ltd aff Online Business Ventures Trust.

You might also have registered a business name, in which case the full legal title of your online business might be – Small Business Pty Ltd aff Online Business Ventures Trust trading as Software Kings.

Do I have to write ‘trading as’ or ‘t/as’ on my website?

‘t/as’ means ‘trading as’. You do not have to put the full legal name of your business on your website. Provided you have a registered business name and an ABN, that is all you need to use. So from the example above, instead of writing Small Business Pty Ltd aff Online Business Ventures Trust trading as Software Kings ABN 00 123 456 789 you can simply put Software Kings ABN 00 123 456 789 on your website.

It is a lot simpler to simply use your trading name and ABN than your full legal name and avoids the problem of messing it up. People who don’t understand their business structure will sometimes mix up what entity is ‘trading as’ and which one is a trustee.

Can I register more than one business name to my company?

Yes you can. If you want to operate a variety of sub-divisions or small business units within your company, you simply register a business name for each unit using your company ABN. You can then trade with the different trading names, but each trading name will have the same ABN.

Can a trustee company run a business?

When you establish a company for the purpose of being a corporate trustee, that should be the company’s sole purpose. If you also want to trade through a company, you should establish a separate company to do that.

As a corporate trustee, a company is responsible for managing the business or assets of the trust for the benefit of the beneficiaries of that trust. The trustee does not own the trust property, and the trustee can be changed.

How can Onyx Legal help you?

if you would like one of our team to help you make sense of your current business structure, or set up a business structure to suit your needs.

Book an Appointment

What Happens when Someone Claims Copyright Infringement Overseas?

What Happens when Someone Claims Copyright Infringement Overseas?

by | Apr 22, 2017 | Copyright, Law for Online Business, Video

What Happens when Someone Claims Copyright Infringement Overseas?

Where in the world can you take action for copyright infringement?

The topic for today is copyright.

Our client has received a letter of demand from Germany.

Now, you are not obliged to go to the courts somewhere else in the world if on your website you have terms and conditions that say the governing law is Australia, or if on your piece of material it says the governing law is Australia. Copyright laws are similar internationally in line with treaties, but are limited by country if you want to take legal action. If you specify the governing law you are in a position to argue that an action started somewhere else in the world is outside its jurisdiction.

So in our client’s case, the dispute is in regard to a book cover. The inside cover states that the governing law is Australia, it’s published by an Australian company and the artist involved is based in Germany.

We have told the German lawyer, “If you want to take action against our client, come here to Australia and take action here.”  Because even if there is a decision in Germany, they can’t enforce it against our client in Germany because the client has no property there. That means they can’t make our client pay unless they come here to Australia and execute against the client’s property here in Australia. So they have an uphill battle in front of them.

When you’re being pursued by someone from overseas for a copyright issue, remember it’s going to be hard for them to get money out of you if they’re in another country. 

How can Onyx Legal help you?

If you are worried that someone is infringing your rights under copyright law, or you receive a letter alleging that you are infringing copyright law, make an appointment so that we can help you chart a way forward.

Make an Appointment

Compare Crowdfunding in Australia

Compare Crowdfunding in Australia

by | Dec 13, 2016 | Law for Online Business, Legal, Legal Issues for Small Business

Compare Crowdfunding in Australia

Crowd Funding concept with smartphone on white table

What is crowdfunding?

Crowdfunding is about enabling other people to support your cause or idea by donating money to you.  Some fundraisers offer perks or rewards in exchange for donations, some don’t.

Organisations that have deductible gift recipient (DGR) status can provide tax deductible receipts for donations of over $2, provided that no perk or reward is offered in exchange for that donation.

In Australia there are strict regulations around offering shares or interests in a company as part of a crowdfunding campaign. Only angel investment platforms with financial services licences are able to support this.

What is the risk?

As a donor you are warned against giving money to crowdfunding campaigns in case they are a scam. Statistically, most are not scams but genuine efforts by people or organisations to fund particular projects or ongoing activities.

Australians reported spend $20billion per year on gambling. With those statistics I am constantly surprised that crowdfunding gets such a bad rap. If we could divert even a fraction of gambling revenue into crowdfunding campaigns (same risk) the potential for growth in innovation is huge.

As a fundraiser, your greatest risk is not grabbing the attention of the public and failing to reach your funding goal. One way to mitigate this is to use crowdfunding platforms that permit flexible campaigns where you receive the funding regardless of whether you reach your target or not.

Chose a platform that is currently active; you don’t want to put time and effort into a great campaign only for nothing to happen with it. For example, Cleantechfundr doesn’t appear to have any activity since 2014.

What are the crowdfunding laws in Australia?

Crowdfunding has worked without government interference or regulation up until now, but in late 2015 the Australian Government had before it draft legislation that would regulate ‘crowd-sourced funding’ (because calling it ‘crowdfunding’ like everyone else would be too sensible).

Fundraising in a traditional sense is covered by the Corporations Act and the rules are enforced by the Australian Investments and Securities Commission (ASIC).  If your campaign is seen to be promoting a financial product (shares, insurance, mutual fund) then you will have compliance obligations and crowdfunding is probably not your best bet.

Where you are collecting a donation and offering nothing more than a nominal reward in return, you are unlikely to have to comply with Corporation Act.

The draft legislation (Corporations Amendment (Crowd-sourced Funding) Bill 2015) proposed that ASIC would have regulatory oversight of crowding in Australia where the fundraising results in the people gaining an interest (shares) in a public company. There was nothing in that draft legislation that affected crowdfunding by proprietary companies, associations or individuals. That Bill has now been shelved (2016).

Other laws that affect campaigns are consumer protection laws. When you promote what you plan to do with the money, you have to be accurate in what your telling people. If what you say is later found to be misleading and deceptive you may be liable to pay fines as well as refund money.

You do have to own or have the right to use any content you include in your campaign to avoid infringing intellectual property laws.

Some states of Australia also require organisations (unless exempt) to obtain a fundraising licence if collecting money for a charitable purpose. These states are:

•    Western Australia (any amount)
•    Victoria (>$10,000 per financial year)
•    Tasmania (for individuals & organisations not incorporated in Tasmania)
•    South Australia (any amount)
•    Queensland (any amount)
•    New South Wales (any amount)
•    Australian Capital Territory (>$15,000 per year)

‘Charitable purpose’ doesn’t appear to cover ‘developing a business or business idea’ but it is worth checking with the appropriate state based regulator to work out whether or not you are covered. A useful resource for this is Fundingcentre.com.au for fundraising legislation and regulations for not-for-profits.

How do crowdfunding platforms work?

Crowdfunding platforms usually collect the money before passing it on to the fundraiser, and will only pass it on under certain conditions. Where a fundraiser has listed an all-or-nothing campaign, the people pledging money are often not charged until the campaign has reached the funding goal. With a flexible campaign, funds raised are handed over whether or not the goal is reached.

Crowdfunding platforms don’t take responsibility for the funds raised. If a fundraiser has offered perks or rewards in exchange for money raised and they don’t deliver, donors have to pursue the fundraiser rather than the crowdfunding platform.

Why crowdfunding doesn’t always work in Australia

You can’t enforce a pledge under Australian law. We have a system where there has to be a mutual exchange before a contract can be enforced. The exchange doesn’t have to be for equal value, it just has to occur.

So, if you are crowdfunding in Australia and you want to be able to collect all of the donations pledged to your campaign, you will usually need to offer and provide something in exchange. This is why a lot of campaigns offer promotional material in exchange for donations.

Realistically, the cost of enforcing small donations is likely to be prohibitive, so it is still an exercise in trust in hoping that people will meet the promises they have made. For this reason, platforms that do not have a minimum cap for collection of funds offer a lower risk to crowdfund fundraisers. If you are able to collect the funds as soon as the donor has the impulse to buy, you are less likely to lose collections because people change their mind at a later date.

What can’t I crowdfund?

Each crowdfunding platform sets out different categories of product or service they won’t allow you to start a campaign for. These usually cover things like illegal activities, adult material, tobacco or alcohol products, financial products, optional medical procedures, gambling and so on.

Different types of platforms

Not all crowdfunding platforms support every idea. Some platforms are aimed at creative projects, some social enterprise or charitable projects and a few are designed to connect small investors with start-ups in exchange for an interest in the company. Below is a PDF showing a selection of different types of crowdfunding platforms available in Australia.

There are a few other platforms promoted as crowdfunding or small investment opportunities (like BrickX and Thinkable) that don’t fit the usual crowdfunding framework are not included.

Download your Crowdfunding Australia comparison table here – crowdfundingpdf

How can Onyx Legal help you?

Find out more

How Governance Can Help an Organization Add Value

How Governance Can Help an Organization Add Value

by | Aug 10, 2016 | Business Structures, Contracts, Employment, Law for Online Business, Video

How Governance Can Help an Organization Add Value

What is the purpose of corporate governance? 

What exactly is governance and why is it important?

Well, it’s not that complicated. It’s just the rules around doing business.

If you’re a registered company, there are certain reporting obligations that you have in order to protect the shareholders, the investors in your business. Good governance also helps to add value to your business so that when you’re looking at getting more investors on board or actually selling your business in the future, you can demonstrate why it’s worth what you say it’s worth.

An example here might be if you’ve got a startup and someone’s developed a piece of software. Now, that piece of software might have some value, and the person who created it might be entitled to receive some money from the business at some point in time once it’s making revenue.

Actually documenting the rights of the company and the developer shareholder are very important because if you’ve got an investor who wants to come into the company, or you’ve got someone who wants to buy the business, they need to know that the business owns that software and on what terms it owns it, because it can make a big difference to the valuation of the business. That is one of the first points of information around governance – ensuring that all the key players in the business understand the rules for the business.

There’s a lot of questions around what level of detail you need to have, but that’s a separate conversation. Typically, a company will have at least a constitution or replaceable rules, and a shareholder agreement governing the relationship between the shareholders. 

How can Onyx Legal help you?

If you would like to understand your business structure and how to bring in new people so that everyone is on the same page, 

Book an Appointment

What Happens when Someone Claims Copyright Infringement Overseas?

The minimum legal terms you NEED for your website

by | Jun 16, 2016 | Contracts, Law for Online Business, Legal, Website Terms

The minimum legal terms you NEED for your website

Website Terms and Conditions

Today we’re talking about the minimum legal terms you need for your website.

The reason you would have a legal terms on your website is to reduce the risk to your business, so it’s not a small thing. It’s actually really important to the viability of your business into the future.

For an example,  I recall a man in the UK who got sued by a company in the US out of a court in Australia because of comments he made on his website. He had no legal terms to protect himself.

One of the key things you can do is use your Terms of Use is to designate your governing law, the relevant law for your website. So if you’re based in the US, you want some law relevant to the US. If you’re based in the UK, you want it in the UK. If you’re in Australia, you want it in Australia. That’s one key thing that Terms of Use can do for you.

The other thing is privacy. Privacy is pretty important.

There are a lot of people out there concerned about how that information is used. Whether you are legally required to protect your client’s privacy or not, it’s a really worthwhile investment to do that.

The quickest way to notify people how you do that is to have a Privacy Policy on your website.

The more products or services you offer through your website, the more terms and conditions you can use to help limit the risk to your business and to better manage the expectations of your customers. 

 

How can Onyx Legal help you?

We can help you in putting together both the Terms of Use and a Privacy Policy. We can also talk to you about any other terms and conditions you might need for your website.

Find out more

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