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How to Setup Your Startup Business Entity

Melbourne Silicon Beach
Thursday, May 13 at 12:30 PM

ALTA Vice President and Legally Yours CEO, Karen Finch was the facilitator for the Silicon Beach ‘How to Setup your Start-up Business Entity’ event. The presenters for this event were Rahul Kumar, Allied Legal’s Director and Talt Anast, a commercial and startup lawyer.

Allied Legal helps with all aspects of the entrepreneurial life cycle. In the presentation Rahul and Talt discussed how to start your business on the right foot, intellectual property ownership, how you select your business model, what industry specific laws or regulations apply to your business, and what grants you are eligible for if you set up your business in a certain way. Here are some of the key issues that were addressed in the presentation!

Who owns the intellectual property?

In Australia IP is automatically owned by the person who creates it. While seemingly straightforward, this can become more complex when dealing with apps or new technology, where an array of people were involved in creation. According to Talt the best solution to this issue is to have everyone who worked on the product sign the IP into the company.

What are roles, responsibilities, and entitlements of your team members?

When starting up a business a lot of the work done may be on a ‘handshake’ basis. However, as your business starts to progress, setting expectations of equity, salary and who is actually a founding member are crucial to avoid disputes.

What will be your business model? Who will be your clients and how will you transact with them?

You may be engaging clients within a standard set of conditions, or no formalised agreement at all. However, every time you engage a client you will be creating a legal relationship. It is important to know your obligations.

Do any industry specific laws or regulations apply to your business?

This only applies to businesses that meet a certain set of criteria. Because of this, it is important to map out the regulatory framework that applies to your business as early as possible in order to ensure compliance.

What grants are you eligible for? What grants can you make yourself eligible for by starting up correctly?

There are many grants for startups in Australia. Knowing what grants, you may be eligible for ahead of time allows you to construct your business to fulfil specific criteria, putting you in the best position possible to receive that grant.

Types of business structures – How to structure your business?

  1. Sole Trader – You as an individual are the business. However, it is not appropriate to continue as a sole trader when risk becomes involved, as you are personally liable for debts.
  2. Partnership – Where two or more people combine their resources to create a business, a partnership is made. Partners are liable for each other’s debts and liabilities. Limited liability partners don’t protect personal liability.
  3. Trust – Where a trustee manages property for beneficiaries. The role of the trustee is to generate income for the trust, using trust assets, which is distributed to the beneficiaries.
  4. Company – an incorporated company is the preferred method for structuring start-ups. It creates a new legal entity and provides a mechanism to house and protect your assets, including intellectual property. IP is usually your most important asset so by signing it away from the individuals who created it, and into the company that wants to control it, you can show investors that the company has control of and owns its most important asset. This can be done by using a deed of assignment.

Corporate Veil

One of the most important features of a company is that it limits your personal liability. As a company is its own legal entity a ‘corporate veil’ is created meaning personal assets cannot be taken to repay the debts of the company, so long as the director or shareholder has acted within the law.

When is the best time to set up your company?

As soon as possible so that IP can be protected, and debts incurred can be separated from your personal liability. By the time your company has the ability to take on risks or debt your company should already have been created. Particularly if you are taking on investors or building a team where contracts are being entered into.

How to register?

A company can be registered through ASIC. Anyone is able to set up their own company and will incur a fee of $500. A lawyer should be consulted ahead of time in order to determine what the most suitable setup is for you; in order to maximise benefits and prevent liability from incorrect setup.

Company Structures

  • Dual Company Structure: A dual company can be an effective way of protecting valuable assets.
  • Holding Company: Holds IP and other material assets, conducting business through operating company.
  • Operating Company: Takes on all the risk with no assets. It engages clients and supplies and hires employees.

To finish the event, Talt went over the different key documents for the early stages of creating a startup business, as well as business names and trademark requirements. To find out more about Rahul and Talt and the legal services they provide, head to www.alliedlegal.com.au

To listen to the full recording of the session, click play below or head here – https://youtu.be/eNr80VZI16k

For all your legal needs, and to find a lawyer without the bill shock, head to www.legallyyours.com.au.