Going into business is exciting but the necessary processes and checks involved to establish a business can become overwhelming. There are many things to consider including:

• Developing a business plan
• Market research
• Premises
• Finance
• Insurance
• Form of ownership
• Record keeping
• Statutory obligations
• Staff

Starting a business is risky. However, such risk can be minimised by in-depth research and planning and good professional advice. It is also important that you bring to a new business qualifications and experience, and personal qualities such as hard work, self-confidence, discipline and enthusiasm.

How important is my lease?

The location of your business is often vital to its success and you must ensure that your lease is properly drawn up so that you do not have to move or change some important aspect of your operations. Before moving into leased premises, obtain a copy of any proposed or exiting lease and discuss with Martin Bullock Lawyers each clause in it and its implications.

Remember that your occupancy may be subject to the NSW Retail Leases Act 1994 and the conditions under which you occupy the premises must be contained in the lease you sign. It ought to allow you to make any alterations necessary to your business and, if the business is in a shopping centre, you would be wise to have a restriction on other businesses which may compete with yours.

Be careful of any restrictions or requirements relating to hours of access or carrying on the business.

Most leases make the lessee responsible for keeping the premises and fittings in good repair and many require you to pay all or a proportion of costs of rates, maintenance and so on. Make sure all these are clearly stated. In some cases the rent may vary according to a fixed percentage or some formula such as the Consumer Price Index or the turnover.

The lease will also refer to the only business permitted on the property and is usually interpreted strictly; this could restrict you from diversifying and make it difficult for you to sell the business. It must be clearly worded with the future development of your business in mind.

What business structure should I choose?

There are several forms of business structures, each having its own legal, accounting and tax requirements. The form of organisation of a business determines many things, including how tax is paid and how profits are disbursed, and it should be geared to help you achieve maximum benefits. The types of structure you may ask Martin Bullock Lawyers to discuss with you include:

• Sole trader: With this structure you intend to conduct your business on your own or with employees but no joint owner. As a sole trader you are responsible for all debts and may have to mortgage your personal assets when borrowing for your business.
• Partership: Up to 20 people may form a business partnership. A larger number is possible for some professions, such as accountants. If no formal partnership agreement exists, partners are deemed by law to be equal owners. Liability for all debts may fall on any of the partners jointly and severally - if one absconds or dies, the others are left with the liabilities.
• Limited liability company: If you form a company, you will as a shareholder have limited liability; you may become an employee and also a director but with certain duties and liabilities and strict responsibilities set ou tin the Corporations Law, and subject to tax, record-keeping and reporting obligations.
• Trusts: These may be more appropriate for holding business assets, rather than trading. They will necessitate seeing Martin Bullock Lawyers.

How is a franchise set up?

Franchising is a type of business ownership which allows an individual, partnership or company to operate an independent business under the banner of an already established business. Before entering into a franchise you should check the reputation, track record, and financial stability of the franchisor very carefully. Also find out what advertising budget and back-up services the franchisor offers.

The fees payable to the franchisor must be clearly stated, along with the terms of sale for goods supplied by the franchiser. You will need to know if you can purchase stock from outside the franchise network.

A franchise agreement is a written document outlining the rights and obligations of both the franchisor and the franchisee. It is a legal contract and much attention should be given to its contents – ultimately it contains the rules and regulations upon which your future income and security will depend. Also, the franchisor must give you a "Disclosure Document" and allow you at least 14 days to consider it.

What do I get when I pay for goodwill?

Goodwill is a way of describing a special asset of a business for which a purchaser can be called upon to pay. It arises for a variety of reasons, for example, the location of the premises, the quality of the products sold, the performance of the staff, the absence of competition, etc. It is generally reflected in earning power but can be destroyed quickly by changes over which the owner has no control, for example, zoning, widening of roads or cancellation of a supply agreement.

The real value of goodwill should be thoroughly assessed by your legal advisor and your accountant as capital gains tax issues may arise.

Are there any government fees I must pay?

Often there are certain permits, multi-purpose licences and certificates you are required to have in order to carry on business legally, for example, a council licence which takes into account Department of Health regulations, a factory registration certificate, tobacco retailer's licence, milk vendor's licence and liquor licence. In many cases these are not transferable by the seller and a new permit or licence must be obtained by you and a new fee paid. In most cases, NSW Government stamp duty will be payable by the purchaser.

What sort of insurance will I need?

Landlords and franchisors may require you to have certain insurances. The only business insurance you are required by law to carry is workers compensation. The rest is up to you, but you would be foolish to neglect to cover such obvious risks as fire, burglary, public liability, personal disability and loss of profits. If you are in partnership you would be well advised to have key person insurance for managing partners and insurance for all partners against the event of a partner's death or retirement.

There are many other insurances which might be appropriate for your business and these should be discussed with Martin Bullock Lawyers to get an impartial assessment.

How does my sale or purchase affect staff entitlements?

It is important that the purchase of a business does not take on the entitlements of staff for which the vendor is responsible, for example long service leave, sick pay or holidays. Provision for these obligations should be clearly settled with the previous owner in negotiations before the sale.

The owner should be aware, too, of the effect of fringe benefits tax on any benefits given to valuable staff to induce them to stay on.

In many instances, the staff are the most vital single asset when you buy a business, but no-one can be prevented from leaving. It can be important to many businesses to ensure that any staff who leave, or even the previous owner, do not set up in opposition using special knowledge or confidential information which has been gained from the business you bought.

Will the government help me?

Some businesses are eligible for assistance from the Government of New South Wales. The Government also provides a comprehensive range of publications, audio-visual material and computer assistance through the Business Enterprise Centres in regional centres around the state.

Selling your business

Selling a business is more involved and complicated than selling your home. You may require expert advice to complete the transaction. You will be required to produce legal and other formal documentation such as business name registration, schedules of plant, equipment and other assets, detailed account statements, and if appropriate, stock records.

Selling your small business

If you decide to sell your small business you will need copies of all the documents related to your business. These include the business name registration, any local council licence or permit, the local council development consent and your business licence. You will also need a copy of the depreciation schedule of plant and equipment lodged with your last tax return.

How Martin Bullock Lawyers can help

Martin Bullock Lawyers can help you identify all the necessary documents and get the required information. Martin Bullock Lawyers will also prepare the contract of sale for you.

In New South Wales, there is a standard Contract for Sale of Business which is approved by both the Law Society of New South Wales and the Real Estate Institute of New South Wales. You can purchase a copy of this contract from a law stationer such as Blue Star.

Martin Bullock Lawyers will explain the clauses of the contract to you and make changes to the contract on your instructions.

Under the contract for sale, one of the warranties you must give is that the premises may be lawfully used for the conduct of the business being sold.

You will also have to provide to Martin Bullock Lawyers certain information including a description of all the assets you are including in the sale, and the details of your lease.

If the proprietor is a proprietary company, the contract of sale should include personal guarantees of the directors of the company. Martin Bullock Lawyers will attend to this.

Under the contract, the sale price is divided up between goodwill, fixtures and fittings, and chattels. How you divide the sale price is important as it affects your tax liability; here again, Martin Bullock Lawyers can provide useful advice.

Passing on the lease

The sale of a business cannot be completed until a new lease is granted or the existing lease for the premises is transferred to the purchaser. It is your responsibility to ask your landlord for a new lease or to get consent to transfer the existing lease. The contract requires you to give a warranty that there is no outstanding breach of the lease.

After the sale

The contract usually provides for you to stay on in the business for a period after completion of the sale to instruct the purchaser in the business and to introduce the purchaser to clients and suppliers.
It is also usual for you to agree under the contract not to carry on a business of the type you have sold within an agreed radius of your old business for a specified period of time.

Further information

Martin Bullock Lawyers can provide specialist legal advice.

The Department of Fair Trading provides advice, information and resources to help people in business.

The Corporations Law is the Commonwealth law which regulates business corporations in Australia.

The Australian Securities and Investments Commission (ASIC) is an independent government body that enforces and administers Corporations Law and consumer protection law for investments, life and general insurance, superannuation and banking (except lending) throughout Australia.