Small businesses often aren’t aware of the legal gaps that exist in their business — something highlighted by the findings of Lawpath’s Legal Health Check of more than 2000 businesses.

As a small business owner, there’s a lot to take care of – bills, taxes, expenses, staffing, more bills, inventory, marketing and sales, your own mental health… did we forget to mention bills?

And that’s just the stuff you are aware of. Unfortunately, seeking legal advice to ensure you’re legally compliant across all aspects of your business frequently falls into the too-hard basket.

Given it’s a complex area by nature, this sees many a business fall into non-compliance simply because they don’t know what they don’t know.

The process itself is also often time-consuming and confusing – you need to research government regulations, choose a lawyer, make appointments, the pricing can be opaque in that you don’t necessarily know how much time, and therefore money, any given task will take, Dominic Woolrych, CEO of Lawpath tells Flying Solo.

“The ramifications of not being compliant are just too big to ignore. It’s important that all businesses — big and small — review their legals to ensure they are compliant,” Dominic says.

Online legal services platform Lawpath recently launched a free Legal Health Check for Small Business tool to help small businesses uncover their legal gaps within minutes. More than 2000 businesses have completed the online questionnaire, with the results painting a picture of the problem areas that are all too often overlooked.

Lack of employee contracts and workplace policies are a concern

Of the 2000 businesses who’ve taken the quiz so far, 40 per cent do not have employment contracts – this includes part-time, full-time, and casual employees. The biggest offenders are those operating partnerships – a hefty 91 per cent said they did not have employment contracts.

“We are often shocked by how many businesses don’t protect themselves with proper contracts. That said, when each contract can cost up to $800 per employee through traditional lawyers, the cost can add up,” Dominic tells us.

Under the National Employment Standards, Dominic says employees are given rights and benefits to protect their livelihood. There are strict obligations that employers must follow and the penalties for breaching these obligations can be very harsh and pricey – fines for non-compliance could be as high as a few 1000 dollars.

“There are other associated issues too,” he adds. “For example, if you put someone on the incorrect Award, you would be liable for back pay which can get very expensive.”

An even larger percentage don’t have workplace policies (including drug and alcohol or social media policies), with 77.5 per cent saying they don’t. Of these, 73 per cent are companies and the others are sole traders and partnerships.

Terms and conditions and privacy policies in the online world

The lack of legal coverage many small businesses carry in terms of the online part of their business is equally concerning. Dominic says while 63 per cent of businesses surveyed said they conduct business online, 22 per cent of these do not have website terms and conditions, and 19 per cent do not have a privacy policy.

“It is vital you have website terms of use. While it’s not a legal requirement, it covers you for copyright and how people use your website – what they can do with the photos and the information,” Dominic advises.

He says terms of use can also limit your liability if the information on the website is incorrect and someone relies on the information.

A privacy policy on the other hand, is required by law.

“Liability aside should something go wrong, it makes business sense. People are very conscious about what’s happening with their information – what you are collecting, who it is being shared with, how it’s being collected and where’s it being stored, especially around credit card information,” he says.

“A robust privacy policy on your website gives people some confidence you’re not on-selling their information and the credit card information is being stored securely, usually by a third party.”

All these things can run up to $4000 to have a lawyer prepare for you, however Lawpath’s document software can create legally binding agreements for you, giving you basic protection.

“Once you getting traction and revenue and customers, you can always engage one of our on-demand lawyers – unlimited access comes as part of our subscription plan, to review it for you and customise it further to your needs,” Dominic says.

Why intellectual property has become hot property

“Whether it is the idea of the business itself or you’re ensuring that anyone helping you with the business is assigning their IP into the company, IP holds a lot of value to your business and a lot of people assume it is automatically covered – it isn’t,” Dominic advises.

“Say, for example, you have someone build you an app or a business website or write content for your site. A contract spelling out who owns the finished product once paid for is vital. If you had someone looking to invest in your business, this is one of the things they’ll likely look at when assessing the value of the business – if you don’t have clearly documented ownership of your IP, they may even walk away.”

Structuring your business correctly

Last but not least, business structure is another area where people are often missing a few legal tricks.

“How you structure your small business has legal and tax aspects,” Dominic says. “For example, from a legal standpoint, a company is actually seen as a separate legal entity, protecting you from personal liability if anything goes wrong.

“From a tax perspective, sole traders and partnerships command tax at your personal income rate, while as a company, it’s a flat rate of 30 per cent.”

This is where Lawpath’s platform can save time and money – while ensuring compliance. You put in a few details and their software drafts all the documents you need such as a constitution, registry of members, and shareholders agreements.

Since 2014, Lawpath has provided affordable legal services to more than 300,000 Australians. Small business owners can access more than 350 legal documents online, as well as their support and advice network of 600 lawyers ‘on-demand’ through a subscription-based model.

Dominic says the end of financial year and the new financial year is a great time to audit your legal compliance and set your businesses up for success — which can all start with the free Legal Health Check.

“Our free online audit was designed for small business owners – solopreneurs and or teams of less than 10 people, providing an outline of their business’ current legal gaps and personalised recommendations and an easy-to-implement game plan and can be done in under 10 minutes,” he says.

Keen to check out how compliant your business is and find out what you could be doing better? Click through and complete Lawpath’s free Legal Health Check.

This article is brought to you by Flying Solo in partnership with Lawpath.

Feature image: AdobeStock