Legal Basics Every Australian Startup Needs to Know

Most startups ignore legal stuff until it’s a problem. Don’t be most startups.

Here’s what you actually need to know.

Company Structure

Sole Trader vs. Company

Sole trader: Simplest option. You are the business. Personal liability for everything.

Company (Pty Ltd): Separate legal entity. Limited liability. More admin.

Rule of thumb: If you’re taking any real risk (customers, contractors, investors), incorporate.

Setting Up a Company

Cost: ~$500-1,000 for ASIC registration plus constitution Time: A few days if you use standard templates

Options:

  • DIY through ASIC
  • Online services (LegalVision, Cleardocs)
  • Lawyer for complex situations

Standard company structure works for most startups. Get exotic only when needed.

Director Duties

As a company director, you have legal obligations:

  • Act in good faith
  • Not trade while insolvent
  • Keep proper financial records
  • Lodge annual reports

These aren’t optional. Directors can be personally liable for breaches.

Contracts You Need

Terms of Service / Terms of Use

Required if you have users/customers.

Must cover:

  • What the service is
  • Payment terms
  • Acceptable use
  • Termination rights
  • Limitation of liability

Template: Start with a template, customize for your business, have a lawyer review.

Privacy Policy

Required by Australian Privacy Principles if you handle personal information.

Must cover:

  • What data you collect
  • How you use it
  • Who you share it with
  • How users can access/correct it

GDPR requirements if you have EU users (most do).

Contractor Agreements

Anyone working for you who isn’t an employee needs a contractor agreement.

Must cover:

  • Scope of work
  • Payment terms
  • IP assignment (critical!)
  • Confidentiality
  • Termination

IP assignment is crucial. Without it, contractors may own what they build.

Employment Contracts

For employees, you need proper contracts compliant with Fair Work Act.

Include:

  • Role and duties
  • Salary and benefits
  • Leave entitlements
  • IP assignment
  • Termination terms

Get these right. Employment disputes are expensive.

Intellectual Property

What You Should Protect

Trade marks: Your brand name and logo. Register if you’re serious about the business.

Copyright: Automatic in Australia. You own what you create. Document it.

Patents: For genuine inventions. Expensive and slow. Most software startups skip this.

Trade Mark Registration

Cost: ~$330 per class through IP Australia. More with lawyer involvement.

Process:

  1. Search for conflicts
  2. File application
  3. Wait for examination (~4 months)
  4. Registration

Worth doing early if your brand matters.

IP Assignment

Everyone who contributes to your product should assign IP to the company:

  • Founders (via assignment deed)
  • Employees (via employment contract)
  • Contractors (via contractor agreement)

Without clear assignment, IP ownership gets messy.

Shareholders and Equity

Shareholders Agreement

If you have co-founders or investors, you need a shareholders agreement.

Must cover:

  • Decision-making rights
  • Share transfer restrictions
  • Vesting schedules
  • Exit provisions
  • Dispute resolution

Don’t skip this. Co-founder breakups without agreements are disasters.

Vesting

Founder equity should vest over time (typically 4 years with 1-year cliff).

Why: If a co-founder leaves early, unvested shares return to the company.

Standard: 4-year vesting, 25% at 12 months, monthly thereafter.

ESOP (Employee Share Scheme)

If you want to give employees equity, set up an ESOP.

New rules (from 2015 reforms) make this easier in Australia. Tax treatment is favorable if structured correctly.

Get proper advice. Getting ESOP wrong creates tax problems for employees.

When to Use a Lawyer

DIY-Safe

  • Basic company registration
  • Standard terms of service (with templates)
  • Simple contractor agreements
  • Trade mark applications

Get a Lawyer

  • Shareholders agreements
  • Investment documents (SAFE, convertible notes, equity rounds)
  • Employee equity schemes
  • Disputes
  • Anything unusual or high-stakes

Finding a Lawyer

Startup-friendly options:

  • LegalVision, Lawpath (online/affordable)
  • Boutique startup law firms
  • Big firms’ startup programs (often discounted)

Expect: $300-600/hour for good startup lawyers. Fixed-fee arrangements for standard work.

Common Mistakes

Handshake Agreements

“We agreed on equity splits verbally.”

Put it in writing. Always. Memories differ.

Ignoring IP Assignment

Contractor builds your core product. No IP assignment. They own it.

Fix this before it becomes a problem.

Copying Competitor’s Terms

Their terms might not apply to your business. Might not even be good.

Start with templates, customize properly.

Skipping Due Diligence on Partners

Doing a deal with another company? Check them out first.

Simple company search at minimum.

Leaving Compliance for Later

“We’ll worry about privacy policy when we’re bigger.”

Regulators and customers don’t care how big you are.

At launch:

  • Company registered
  • Founders’ shareholders agreement
  • Terms of service
  • Privacy policy
  • Contractor agreements for anyone building product

Within first year:

  • Trade mark application
  • Employment contracts for any employees
  • Review all agreements with a lawyer

This isn’t comprehensive. It’s the minimum. Expand as you grow.

The Meta-Advice

Legal issues are expensive to fix, cheap to prevent.

Spend money on lawyers for the important stuff: shareholders agreements, investment docs, employment.

Use templates and online services for standard stuff.

Don’t ignore legal entirely. But don’t let legal perfection prevent shipping either.

Balance is key.