Business and Commercial

You should ensure that you have a well drafted and clear supply agreement in place with the other business or person. Contracts can fail where terms are not clear or unreasonable.

This is particularly important when you need to stipulate any terms for what will occur if the business or person you are supplying goods or services to breaches a term of the agreement either by not paying in accordance with the terms of the agreement or damaging goods which have not yet been paid for.

You should also ensure that the other party has properly read the terms of the agreement before they enter into the agreement.

Terms which may be prohibited by law in any given state can also jeopardise your contract and render it unenforceable, even in circumstances where it may be an innocent mistake.

Ensure you have your terms and conditions properly drafted and reviewed to avoid loss in your business.

There are various structures you can use to set up a business and each will depend on the needs of the business, your skillset and your goals for the business. These structures include:

Sole Trader – if you intend to work on your own, this might be the best option for you. It is simple to set up, simple to control and has minimal reporting requirements. Although simple, you will be liable for all debts.

Partnership – by definition in the Partnership Act 1892 (NSW), a partnership is the association of individuals or entities for the purpose of carrying on business in common with a view to profit.

It is relatively inexpensive to start up and you can combine skills and finances with the other person or entity. Unfortunately there are significant challenges with partnerships in terms of tax and it makes it an inflexible structure.

Company – with limited liability and perpetual succession, a company structure offers flexibility and the opportunity to take advantage of a variety of tax deductions.

The costs however are more complex and there are more reporting requirements. Directors must also have a positive role in company affairs and be aware of their duties under the Corporations Act.

Trust (discretionary, unit or superannuation fund) – trusts are complex entities used to hold the legal interest for the benefit of another. The main benefit of any trust is its limited liability and asset protection, however, they are complex and you must ensure you get the right advice from your financial advisor and a lawyer.

Combination of the above.

Joint Venture – this structure relies on the parties entering into an agreement to work together for a joint purpose whether it be two individuals or two businesses.

The parties will only be liable for acts done by themselves and remain their own separate business while working together for a joint purpose, for example the management of a hotel.

There are various personal, business and financial issues you should consider before you purchase an existing business such as your experience and skills, why the business is being sold, the assets of the business, its current capital, and external factors such as competitors and local developments.

Some of these considerations may not be evident in a contract for sale of a business and require further investigation.

Before you buy a business:

• make sure the value of the business is justified. Does it have assets and goodwill that boost the value? Does it have valuable intellectual property?

• Are the profits legitimate and are sales increasing or decreasing while maintaining overheads?

• What are the hurdles for the business and are there any disputes or court claims?

• Does the premises, plant and equipment, suppliers and employees meet the requirements of the business and its needs?

Ensure you have a plan when buying a business and prepare appropriate goals, market strategies and performance indicators, while also ensuring you plan to implement training, management and accounting systems should they not already be in place.

If you are financing the purchase, also consider the above to ensure you can afford the payments.

The importance of a watertight agreement between you and the client is crucial when things go wrong.

While you can plan to avoid complications, a well thought out supply agreement can mean the difference between losing money and being able to recoup some of the losses.

You should first attempt to contact the client to remind them about making payment. If you are in a position to do so, you should offer a payment plan or payment extension.

If these do not assist in recovering the owed amount, you may need to have a letter of demand issued to the debtor and should they not respond or fail to repay the debt, you will need to consider commencing proceedings to recover the debt.

The size of the debt, or the term breached in the contract, will depend on what cause of action you will have and the court in which proceedings are commenced.

You should also obtain legal advice about your options, rights, and possible risks to your business if you are unsuccessful.