Common Legal Mistakes That Could Jeopardise Your Business
Operating a business in Australia takes more than a good product or service; it takes strict compliance with legal requirements. Most businesses, from small startups to large corporations, make expensive legal errors that can result in fines, lawsuits, or even business shutdown. Knowing the most prevalent compliance risks and addressing them ahead of time is crucial to remaining on the correct side of the law.
In this tutorial, we're going to discuss the most common legal errors Australian companies make, the impact of these errors, and how to prevent them.
Not Registering a Business Correctly
One of the very first and most important things in business commencement is that it should be registered in the correct way with the Australian Securities and Investments Commission (ASIC). Most entrepreneurs neglect to:
Register an Australian Business Number (ABN)
Register for Goods and Services Tax (GST) if annual revenue is more than $75,000
Select the appropriate business structure (sole trader, partnership, company, or trust)
How to Avoid This Error
Go to business.gov.au to verify the required registrations.
Seek advice from a business lawyer to identify the most suitable structure for your business.
Disregarding Employment Laws and Workplace Compliance
Employing staff involves compliance with Australian workplace legislation, such as:
Fair Work Act 2009: Regulates the employment conditions, unfair dismissal, and rights of the employee.
National Employment Standards (NES): Minimum wage, leave entitlements, and working hours.
Workplace Health and Safety (WHS) laws: Provides a safe workplace environment.
Not complying with these laws will lead to legal proceedings, employee disputes, and reputational loss.
How to Avoid This Error
Check compliance with Fair Work Ombudsman on a regular basis.
Enforce correct employment contracts and policies.
Offer WHS training to employees.
Misclassifying Workers as Independent Contractors
Some companies try to save money by hiring workers as independent contractors rather than employees. But if the arrangement is similar to that of an employee (control over work schedule, no subcontracting, etc.), the company can be penalized by the Australian Taxation Office (ATO) and Fair Work Australia.
How to Avoid This Error
Use ATO's guidelines to determine worker classification.
If unsure, consult with a lawyer before hiring a worker.
Violating Consumer Law Rules
The Australian Consumer Law (ACL) safeguards consumers from deceptive advertising, defective goods, and deceptive trading practices. Some common violations are:
False representations in advertisements
Failure to provide refunds for defective goods
Unfair contract terms
How to Avoid This Error
All marketing and advertisement materials must adhere to ACCC guidelines.
Provide a clear returns and refund policy.
Educate employees on consumer law requirements.
Unsound Data Privacy and Cybersecurity Practices
Breaches of data and improper handling of customer information result in severe legal outcomes under the Privacy Act 1988. Companies that do not protect sensitive information face fines from the Office of the Australian Information Commissioner (OAIC).
How to Evade This Error
Adhere to the Notifiable Data Breaches (NDB) scheme.
Secure IT infrastructure with an investment.
Update privacy policies periodically in accordance with Australian Privacy Principles (APPs).
Not Meeting Tax Compliance Requirements
Tax mistakes can result in audits, penalties, and financial losses. Some of the common errors are:
Not registering for GST when necessary
Making incorrect claims for deductions
Not maintaining good financial records
Not meeting Business Activity Statement (BAS) due dates
How to Avoid This Error
Keep accounting records clear using accountancy software.
Check with the Australian Taxation Office (ATO) regularly for compliance.
Use a professional accountant.
Poor Business Contracts and Agreements
A failure to have proper legal contracts can lead to conflicts with clients, suppliers, or staff. Typical problems are:
Unclear or absent terms in contracts
Having no partnership agreement documents
Not specifying methods of settling disputes
How to Avoid This Error
Create clear contracts with specified roles, duties, and means of departure.
Obtain legal counsel when creating significant agreements.
Not Safeguarding Intellectual Property (IP)
Many businesses overlook the importance of protecting their intellectual property, which can result in brand theft or competitors using proprietary designs or innovations.
How to Avoid This Error
Register trademarks and patents via IP Australia.
Draft NDAs for employees and contractors handling sensitive business information.
Neglecting Environmental and Industry Regulations
Businesses in industries such as construction, manufacturing, and hospitality must adhere to specific regulations regarding environmental sustainability, food safety, and occupational health.
How to Avoid This Error
Learn and follow Environmental Protection Authority (EPA) regulations.
Regularly audit to maintain adherence to industry-related legislation.
No Business Continuity and Risk Management Plan
Companies that lack a strong risk management plan tend to struggle during crises like economic recessions, cyber attacks, or litigation.
How to Avoid This Error
Create a risk management plan for financial, operational, and legal risks.
Regularly review and update policies based on legal alterations.
Steering clear of these popular legal errors is vital to your business's success and longevity. Adhering to Australian legislation prevents you from incurring hefty fines, court cases, and damage to reputation.
Don't risk your business unnecessarily. New South Lawyers offers specialist legal advice for Australian businesses. Whether you require help with compliance, contracts, or employment law, we can assist.
Contact New South Lawyers today to safeguard your business and achieve complete compliance with Australian law!
