Contracts
A contract can be verbal or written (sometimes both) and is a legally binding agreement that establishes the terms and conditions which bind two or more parties.
Leases
As a business owner and tenant, a commercial lease will be one of your business' most important contracts. It imposes legal and financial obligations on you over a period of years, and your landlord could be one of your most well secured creditors. If in the future you wish to sell your business, a lease is also considered a core asset.
A lawyer can provide advice on your key obligations, potential pitfalls, and negotiate on your behalf when deciding to enter into a commercial lease. For example, a lawyer can advise you on the outgoings that your landlord is entitled to. In addition, they may also be able to negotiate the maintenance terms, signage restrictions or eviction clauses on your behalf.
It is generally considered a commercially wise decision to ask a lawyer to act on your behalf to review any proposed lease before you sign, rather than bring a tenancy problem to your lawyer after the lease is signed.
Operating / Shareholder Agreements
An operating agreement (also known as a shareholder agreement) governs the financial and managerial rights and responsibilities of the members of a company. Taking the time to carefully draft an operating agreement from the outset can help your business run smoothly and protect you and your business from costly financial and management disputes down the track.
Company operating agreements cover many important topics including member’s business interests, their rights in running the business, and how the company will be managed. No two operating agreements are the same, so it is important to decide what is right for your business.
Key features of an operating agreement may include:
A Scammell & Co. solicitor can draft an operating agreement, review and advise on existing agreements, and act for a party should a dispute arise.
Partnership Agreements
A partnership is a group or association of people who carry on a business and distribute income or losses between themselves. For example, if you and a friend or family member decide to set up a business together, you might operate as a partnership.
A partnership is relatively inexpensive to set up and operate. The partners share income, losses and control of the business in the proportions agreed between them.
A written partnership agreement is not essential for a partnership to exist, but is a good idea, as without a formal agreement the provisions of the Partnership Act 1891 (SA) will apply (which may or may not reflect the intentions of the partners). A partnership agreement should outline how income or losses will be distributed to the partners and how the business will be controlled.
A partnership agreement can help prevent misunderstandings and disputes about what each partner brings to the partnership, and what they are entitled to receive from the income of the business. This is particularly important for tax purposes if the profit or losses are not distributed equally among partners.
The partners in a partnership are not employees, but the partnership might also employ other workers.
Partners are responsible for their own superannuation arrangements. However, the partnership is required to pay superannuation for its employees.
Scammell & Co. can assist with drafting a partnership agreement that takes into account your unique business needs.
Key features of a partnership business structure include:
As a partner you can't claim deductions for money drawn from the business. Amounts you take from a partnership are not wages for tax purposes.
Franchise Agreements
Franchising is a model for doing business. When you enter a franchise agreement, the franchisor controls the name, brand and business system you are going to use. The franchisor grants you the right to operate a business in line with its system, usually for a set period of time. Your franchise agreement will tell you what will happen at the end of this period, and in some instances you might not able to keep your franchise business.
Key terms:
Franchisor: allows another business to use its brand or system to sell products or services.
Franchisee: is the business allowed to use the franchisor’s brand and system to sell products or services.
Franchise agreement: when you buy a franchise you will have a franchise agreement, which is a contract between a franchisor and a franchisee that says what you can and can’t do when you are running the franchise. You would usually 'enter' a franchise agreement by signing a written agreement, but a franchise agreement can be written, oral or implied.
Before buying a franchise:
It is important to check for yourself whether the franchise is a good deal or not. It is against the law for a franchisor to give you information that is false or misleading. However, there is no legal protection for someone who doesn’t do independent checking and research and signs up to a bad deal.
Don’t be rushed into signing a franchise agreement and make sure you understand what you are agreeing to.
Read your disclosure document and take the time to understand the information in it.
Speak to current and former franchisees. They can help you understand the strengths and the weaknesses of a franchise and what it is like in real life. The disclosure document should include contact details for current and former franchisees.
Don’t rely on what a franchise salesperson tells you. Ensure all claims are written down or preferably have them included in the franchise agreement.
Get independent legal, accounting and business advice about the franchise. One type of advice may not be enough to properly inform you.
Imagine yourself as a franchisee. There will be rules set by your franchisor that can tell you what you can and can’t do. Think about whether franchising suits you.
A Scammell & Co. solicitor can provide advice on your franchise agreement to ensure your rights and interests are protected and that you understand your responsibilities. We can also advise in circumstances where a dispute has arisen.
