Technology law is a broad area. A good starting point is to identify and protect any valuable intellectual property. Inventions, algorithms, code and concepts need to be appropriately protected. Different avenues may be taken – patents are expensive and may not be available, or justified, depending on the situation.
The structure of the technology business has long term consequences, including regarding tax, liabilities, compliance, investment and exit.
Raising capital is obviously an important step for most technology businesses, be it venture capital, debt, or a public listing. A balanced and thorough Shareholders Agreement is essential for multiple shareholders – it will protect the business and avoid future disputes.
Commercialisation of technology involves careful legal consideration. A well-negotiated licensing agreement can be the difference between success and failure.
If your intellectual property is infringed, we have the ability to execute highly complicated litigation, if necessary.
Our technology lawyers can also assist with the many “nuts and bolts” legal aspects of running a technology business.
- Privacy policies: how must you treat personal information? How can you commercialise data?
- Data breaches: what are your obligations?
- Terms and conditions of use: effective documents need to be tailored to the demands and practicalities of your business, while still making sense to the end user. Is there a risk that unfair contracts legislation could render your standard form contract void?
- Website development agreement: who owns the IP?
- Software development agreement: is the developer a contractor or an employee? How do you give them an appropriate level of flexibility while still retaining control and requiring certain standards?
- Confidentiality agreements and non-disclosure agreements: are they justified or will it scare away an interested party?
- Defamation: in the age of social media and smartphones, how do you avoid getting caught up in an online defamation case?
- Employees: sensible employment agreements and incentives (for example, employee share schemes) are crucial for sustainable companies
- Cross-jurisdictional issues: the internet is global – is your technology breaking laws overseas?
A case study – when establishing an online business, new owners often encounter countless obligations, rules, regulations and policies which can be confusing. Failure to understand and comply with these laws can lead to serious consequences including fines, sanctions and, potentially, the failure of the business.
The following nine steps explain some of the issues you will need to deal with:
1) Determine the legal structure that best suits your business
When starting a new business you must decide what form of business entity will provide you with the greatest benefit. Four key considerations are:
- tax management (not paying more tax than you need to)
- asset protection (protecting your assets from being seized if you are sued)
- cost (the cost of setting up and maintaining the structure)
- succession planning and general flexibility (some structures are easier to “exit” than others)
Different business structures have different legal requirements, liability limitations and tax consequences. Commonly new businesses are set up in one of the following ways:
- as a sole trader
- as a partnership
- as a company
- through the establishment of a trust
Our startup lawyers can provide you with information on the pros and cons of each entity (and see the Structure document in the Publications section for more information).
2) Make concrete arrangements with your business partners
Take the time to work out how you and your business partners will interact with one another. Having a clear understanding of your rights and responsibilities will reduce the likelihood of disputes in the future. Importantly, once you all have a clear understanding of your rights and responsibilities, that understanding should be recorded in a legally binding agreement.
Important questions to ask include:
- how will decisions relating to the business be made?
- what happens when a business partner wants to leave the business?
- in what circumstances can a business partner be required to leave the business?
- what happens if a business partner dies or becomes incapacitated?
3) Register your business name
A business name is simply a name or title under which a business trades. It identifies your business to your customers, allows you to differentiate your business from your competitors and enables your customers to make an emotional connection to your business and brand.
If you choose to operate as a company, you will need to register your company name with the Australian Securities and Investments Commission (ASIC). If you want your company to trade under a different name, then you’re also required to register the trading name with ASIC as a business name. If you choose to operate as a sole trader, partnership or a trust, and not as a company, then you will have to register your business name with ASIC. If your business name is your, or your partner’s, first name and surname, then there is no need to register.
It is important to note that registration of a business, company or domain name does not in itself give you any proprietary rights – only a trade mark can give you that protection.
4) Register your domain name
Your domain name is the web address you will be using when you trade online (also called a URL, or uniform resource locator). This usually incorporates your business name in some way, for example, www.yourbusinessname.com.au. Like your business name, your domain name is a valuable part of your business identity and is an important marketing tool that can help customers find and identify with your business. In order to protect your domain name it must be registered.
For further information on registering a domain name please contact us.
5) Registering for tax purposes
You should also consider the impact of Australia’s taxation regime on your business. New businesses need to register for tax purposes. You will need to obtain an ABN, a TFN, and in most cases, register for GST. Depending on the circumstances of the business, you may also need to register for fringe benefits tax, pay as you go (PAYG) withholding tax, and payroll tax.
6) Business licences and permits
To comply with the law, your business may need specific registrations, licences or permits. Which ones you need will depend on your business structure, its location, whether your business employs staff and the type of business you’re operating.
Our technology lawyers can advise you on your licensing and registration requirements and help you to apply for them.
7) The fine print
Terms and Conditions
Offering goods or services online is, from the point of view of contract law, similar to setting up a shop. You can form a contract online with your customers and you are required to clearly lay out your terms and conditions of trade. These terms should not simply be copied from another website but rather carefully drafted taking into account your type and method of business and the goods and services you are providing.
Some of the key issues commonly covered by terms and conditions are:
- how to place an order for goods and/or services
- price and payment terms
- terms of delivery of goods
- refunds and returns policy
- use of confidential information and ownership of intellectual property
- business warranties
- limits on business liabilities
- restrictions of website use
- governing law and jurisdiction
Advertising is another area that can potentially get new online businesses into trouble and in Australia there exists strict anti-spam laws in the form of the Spam Act 2003 (Cth). One key requirement is that business owners must ensure that they have authority from the customer before sending promotional and marketing material by email (or by other electronic means i.e. SMS). There are further requirements that will also need to be considered.
8) Leasing premises
Before entering into a lease you should consider the following factors:
- is the premises suitable for your business needs?
- what are the fit out/refurbishment requirements under the lease?
- are payments (rent and operating costs) under the lease sustainable?
- how is the rent reviewed?
- is the term of the lease sufficient and do you require an option(s) to renew?
- can you assign the lease/sublet the premises?
- what are the grounds for early termination of the lease?
In order to minimise risk, new businesses should consider insurance. Some of the common insurances are:
- Workers Compensation Insurance
- Public Liability Insurance
- Indemnity Insurance
- Building Insurance
- Contents Insurance
- Income Protection Insurance
- Death and Permanent Disability Insurance
Beside these standard insurances, you should consider specialised insurance for particular risks facing your business. We recommend that you speak to an insurance broker about your insurance needs and obligations.
Other matters that startup business owners may need to consider include:
- protecting intellectual property (for example, imposing confidentiality, registering trade marks, applying for patents, and providing for contractual ownership of software code)
- obligations to past employers
- employment and workplace issues
- contracting with suppliers
- directors duties (in the case of a company)
Please contact our technology lawyers in Perth for assistance.