BUSINESS

  • Business Structures – the foundation question when commencing a new business or reconsidering an existing business is: what is the most effective structure for that business? It may be one of many common types or a combination of those including: a sole trader – partnership – a company – a trust. In choosing the most appropriate structure a balance must be struck between competing factors including:
  • Flexibility – will the structure readily permit the departure of participants and the introduction of new participants?
  • Tax effectiveness – will the structure provide the opportunity to distribute income thereby spreading the impost of income tax? will it give owners have opportunities to minimize the impact of Capital Gains Tax when they wish to sell or transfer their interest in the business?
  • Asset protection – will the structure protect the business assets contributed by owners to the business? Will the owners and managers of the business be exposed to a risk of personal liability to creditors? should business assets be held by a separate entity which does not take risks? should security be granted to the owners in respect of their contributions to the business and if so, how?
  • Shareholder and Partnership Agreements – as a ‘participant’ in a business it is essential that your rights and interests are recorded in writing. The primary function of the agreement is to regulate the relationship between the company, its owners, managers and other participants, including:
  • Participation – what is your role and how is the business controlled? are you a creditor or an owner or both? is it intended that you are consulted in the management of the business? are you are entitled to attend meetings? are you simply contributing assets for the use of the business? how can you protect your interests?
  • Management – what is the authority of the managers and directors? when should they be required to consult the owners? how should deadlocks be resolved?
  • Profit distribution and loss sharing – how will the profits of the business be distributed? if you work in the day-to-day conduct of the business should you be paid for that work in addition to profit distribution? business are you entitled to remuneration or other payment? how and when are profits to be distributed or losses shared and in what proportions?
  • Dispute resolution – how are issues that arise between the owners and managers to be resolved? what happens if the personal relationship between the owners irretrievably breaks down? should shareholders be entitled to all the right of first refusal if a participant leaves? if so on what terms?
  • Loan and Security Agreements – if you provide working capital or equipment or intellectual property should your interest those be protected?
  • Security– if you lend money or supply valuable assets to the business, what security can be given to protect your interests of those things? will that security be enforceable in the event of a breach? Does the security need to be registered and if so, with whom?
  • loan agreements – if you lend money for the purposes of the business should I have a written loan agreement?  what should the terms and conditions of that agreement be? are you entitled to be paid interest?
  • Buying a Business – before you sign a contract to purchase a business what advice should you obtain?
  • Legal advice – are the proposed terms and conditions of the contract of sale reasonable? who should the purchaser named in the contract; you or a company that you control? is GST payable on the price? what due diligence inquiries should be made before the contract of sale is completed? is the business dependent upon one or more individuals that can set up in competition to the business after completion of the sale? how can and the buyer the seller from competing with the business after the completion of the sale? what other special condition should be contained in the contract of sale to protect your interests?
  • Financial advice – is the business is viable? does it make a profit? are all of the outgoings of the business properly recorded in its books? which business structure should I use?
  • Restraints of trade– what is the purpose of a restraint of trade? are they enforceable? if not, why not?
  • Agreements – should I obtain advice before it is signed? does it accurately and completely your agreement? what is the meaning and effect of the agreement? what amendments should be made to the agreement before it is signed and why? are you obliged to sign a contract offered on a ‘take-it or leave-it’ basis? if you enter into such contract can you later be released from it?