There are so many different things that you can stuff up in your business when it comes to legalities. Jeremy Streten, the author of The Business Legal Lifecycle, joined Josh to chat about all things regarding the legal aspects of businesses in Australia.
If you want to identify the major legal risks that you have in your business, learn more about the Business Legal Lifecycle quiz.
Is Your Business Healthy from a Legal Perspective?
I’m a big fan of thinking about the law in a proactive way and teaching ourselves what it is that we need to know about our business rather than just trying to do it all ourselves or just waiting for something to happen.
You can understand the legal aspects of your business. You don’t have to have a law degree. Educate yourself, find out what it is that you need to do. Don’t just assume that everything will be okay, or you can fix it later. Get knowledge so that you can educate yourself and plug those holes before they appear. If you do that, you’ll build a very successful business.
It comes down to understanding the law, even in a superficial way, so that you can see that maybe you’re going down the wrong path or maybe you’re doing the wrong thing. Knowledge is really the key to being able to figure out all that stuff because no lawyer can tell you everything. If they try to do that, then they’re kidding themselves.
Get support services so you have virtual firefighters while you work on your business. Learn more!
Are Contracts Worth the Paper They Are Written On?
They are absolutely worth the paper they’re written on if they’re put together properly. They’re not worth the paper they’re written on if you just pull off an agreement from Google because they might be based on EU law or US law. You’re in Australia so if you do that, it’s probably not worth the papers they are written on.
A properly drafted agreement, which has been considered by a lawyer who knows what they’re talking about, can review it, and can make sure that all of the parts and the names are correct on the agreement, is definitely worth the paper it’s written on.
It always makes me laugh when I join a networking group and people say that those employment contracts aren’t worth the paper they’re written on. That’s because all they do is just fill in the blanks and then expect that to work. It never does. A properly considered and drafted agreement will work every single time if you do it properly.
When Should Contracts Be Reviewed?
When drafting a document, lawyers actually review what’s the intent of the document and how does it help take you towards your goal. Some of us do it more often than that, but generally, people change the documents or at least have them reviewed and considered whether they need to be changed every two to three years.
It also comes down to whether it’s a really important contract. If it’s a contract that’s paying the majority of your income for your business, you definitely want to be reviewing it all the time. If it’s a nondisclosure agreement, you might want to review it if there’s a change in your circumstances, such as you’re coming up with something new. Other agreements that may not be that important don’t need to be reviewed all the time. You certainly don’t need to spend thousands of dollars on a lawyer reviewing them. You just need to make sure that they still cover what you want them to cover.
Do you need time to review contracts and other important aspects of your business? Inquire about our top-tier support services.
Signing Documents: Digital Signatures vs Wet Ink
You can sign contracts electronically. There’s lots of great software that lets you sign contracts.
From a bank point of view, it’s probably also around anti-money laundering laws. The banks have to be very careful with who they accept money from and they have to make sure that you’re not a terrorist or someone who’s taking illegal funds. They want to get you in to identify you personally so that they can verify to the government that’s the case.
For property, as long as you’ve got an idea and you can prove that it was you that signed it, you can sign them electronically pretty easily. The banks have their rules to protect themselves. Remember, they’re always protecting themselves first from getting in trouble from the regulators, and your convenience is second.
Business Partnerships and Fraud
It comes down to not monitoring everything that’s going on, poor planning, and the other person just doing the wrong thing. The law is there to protect you if someone tries to do the wrong thing or does the wrong thing against you, so you’ve got to rely upon it.
One of the reasons I wrote the Business Legal Lifecycle is that I had a couple of matters where I acted for people because one business partnership went down and lost a million dollars of one of the partners’ money, and another guy almost lost $2 million of his own money all because they didn’t get the legal advice first. It’s very easy to just run with it and see what happens, but at the
end of the day, the risk of what can go wrong is quite extraordinary. People don’t realise that’s the case.
I have business partners, and we have a written agreement that sets out all the rules. If you’re in a business partnership, you’re not going to cover every situation, but you can cover the major ones and what happens if there’s a disagreement. And then just make sure that you’re talking. There will be the odd time, one in every thousand, where someone will express to go out and do the wrong thing. As long as you’re communicating and you’re working out what’s going on and you’re discussing all the ins and outs of the business generally, that doesn’t happen. The vast majority of business partnerships are really strong and don’t fail.
Protect yourself with solid agreements. If you suspect something’s up, it probably is so it’s probably time to have a chat.
Turn your IT into a utility! Learn more about how managed services can help drive your business success.
If You’re in a Business Relationship: Get Your Own Lawyer
The ideal situation is that each has their own lawyer. The problem is that it’s expensive. It can also be a bit of a painful process because sometimes lawyers like to argue over the insertion of a word here and the insertion of a word there, and that can end up costing you a lot of money.
As long as everything’s agreed and everyone understands where each other is coming from, having a single lawyer draft up the agreement is perfectly fine as well. Just know that if there’s a dispute between those business partners down the track, you can’t use the same lawyer. That lawyer is then conflicted out so you have to get your own lawyers. It really comes down to complexity and whether or not it is something that you’re willing to spend the money on because it does become quite a large investment.
Tips for a Successful Business Succession Planning
Agreement = Disagreement
What I say about most things in life is think about what’s in it for the other side. Always think about what’s in it for the other person that you’re dealing with and make sure that you’re talking to them in terms of what’s in it for them to enter into the agreement, which is about protecting you and protecting them.
Also, it’s only there if there’s a disagreement. I love the term “agreement” but it’s really not an agreement—it’s a disagreement. It’s what’s going to happen if we disagree about things. You’re agreeing that if we can’t agree, then we’re going to follow this process to resolve the dispute. No document can cover every single scenario and you really just want to cover off enough so that you’re not stuck spending thousands of dollars of lawyers down the truck if there’s a fight.
Maturity of a Business and When to Get Legal Advice
One of the reasons I developed the Business Legal Lifecycle was to give business owners an understanding of what they need to do and when they need to do it from a legal perspective.
Seeking legal advice does not depend on revenue goals, but it really comes down to the risk of something going wrong and the investment that you must make to then reduce that risk. If you have a lemonade stand, you probably don’t need to worry about your legals. But if you’re opening up a shop, then you need to start worrying about those kinds of things.
The Business Legal Lifecycle goes through 13 phases and maps out what you need to do and when.
- The first three phases are all about starting up.
- The next four are bringing on employees and starting to consolidate.
- Then there are four phases about scaling—but some businesses never get to wanting to grow and scale; they just want to build their business, and that’s what they want to do for the foreseeable future, which is fine.
- The last two phases are retirement and insolvency.
Take the Business Legal Lifecycle Online Quiz
The Business Legal Lifecycle Online Quiz
At Business Legal Lifecycle, we have a quiz that we’ve developed. It asks 31 questions, which takes about 10 minutes to answer. It’s very high level, but the idea of it is to identify where the major legal risks are within your business.
It gives you a legal report of the major legal risks that you have in your business and what you need to do so you start understanding the major things that you need to plug the holes in. It’s designed to take it to a lawyer or if you don’t have a lawyer, we will refer you to one to start doing the work that you need in your business to protect your legal risks. We charge $97 for the quiz but Business Built Freedom listeners get 50% off.
