You may be ready to share your hobby with the world or finally tap into your inner entrepreneurial talents. Starting a retail business can be fun and a great way to earn cash. There are some important considerations you need to make first before you enter the industry. This article will outline the five legal issues you need to work through before officially launching your retail business.
Choosing a Business Structure
A business structure refers to the legal basis for how your business trades. Different types of business structures have different administrative, tax, and set-up requirements and some limit the liability of the business’ owners. The most common forms of business structures include:
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This form of business structure arises automatically when you start a business and is the default business media. Sole traders do not benefit from limited liability, which means the law treats your business’ obligations as your own. | |
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Partnerships arise when two or more people run a business together. You do not usually need to register a partnership because it comes into existence automatically. However, some partnership require registration, especially if you wish to benefit from limited liability. | |
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Limited company |
You need to incorporate a company to trade through it (or you can buy one “off the shelf”). Companies are owned by its shareholders and managed by its directors. For small startup graphic design companies, the shareholders and directors are usually the same individuals. Most companies provide shareholders limited liability, which means they are not personally responsible for the business’ debts or obligations. |
Fair Trading Act
Under the Fair Trading Act (FTA), you must represent your products fairly and honestly. You cannot oversell or make false promises to your consumers. Your retail business must:
- accurately represent goods and services;
- ensure that employees are familiar with the products and know what they can and cannot do;
- meet product safety requirements; and
- give required information to customers such as GST and country of origin.
When advertising your business products, you should ensure it is done fairly fairly and accurately. Furthermore, this Act prevents you from making unsubstantiated claims about your products. For example, you cannot say that your kimchi is organic and peanut-allergen-free if you do not have the evidence to prove it.
If your retail business breaches this Act, then customers can sue the business and take you to court. You may have to pay costs, compensation, or other penalties if the Court orders you to do so.
Continue reading this article below the formConsumer Guarantees Act
The Consumer Guarantees Act (CGA) protects customers from faulty products and ensures that your retail business maintains high-quality goods. To comply with this Act, you must ensure that your goods are:
- an acceptable quality;
- fit for purpose;
- match the description given;
- match samples;
- sold at a reasonable price; and
- able to be legally sold and purchased.
If a customer accidentally buys a faulty product, they are entitled to a remedy under the CGA. These remedies may include:
- repairs;
- refunds; or
- replacements.
Furthermore, if you deliver products to consumers, then deliveries should arrive at an agreed time and in a reasonable condition. You should have spare parts available, and if not, customers should be notified of this beforehand.
Commercial Lease Agreement
When opening a retail store, you may need to lease a prime retail space to sell your goods. Your commercial lease agreement will outline your and your landlord’s rights and obligations concerning the property. Once both parties sign the agreement, it will become legally binding. As a result, you may want to negotiate the following terms in your lease agreement:
- lease term;
- rent amount and rent review method;
- outgoings;
- permitted use of premises;
- description of premises;
- your maintenance obligations; and
- landlord’s maintenance and repairs duties.
Employment Contracts
You may choose to employ some workers for your retail business to help you run the store. If so, you must draft and write up an employment agreement that sets out the terms and conditions of the job. The agreement must be in writing and is legally binding once both parties sign it.
When drafting an employment agreement, it is best to seek legal help to avoid missing any key terms. The contract should include:
- name of employer and employee;
- job description;
- workplace location;
- how many hours and days the employee will work;
- wage or salary amount;
- leave entitlements; and
- redundancy entitlements.
Key Takeaways
When starting a retail business, there are some legal considerations you should bear in mind. Firstly, you need to choose a business structure to understand how your business will be run. Thereafter, you need to prepare your business to comply with the FTA and CGA obligations. You should read over your commercial lease carefully to ensure that it benefits your business. Lastly, you must have a written employment contract for each employee; else you can be fined.
If you need help making your retail business legally compliant, you can contact our experienced startup lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
An employment agreement will outline the terms and conditions of the job. The agreement must be in writing and should include essential information such as salary, job description, redundancy, and hours and days of work. This will help the employee know their rights and obligations during their work.
Your retail business can be structured as a sole trader, partnership, or company. Each structure has its own requirements, although generally, a sole trader is the easiest to set up. Alternatively, a company has more requirements but is more likely to grow and scale in the industry.
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