If you’re about to sign a lease for business purposes I have three messages for you:

• Congratulations on your new business venture and;
• Whatever you do, DO NOT SIGN ANYTHING WITHOUT A LAWYER.
• In fact, don’t even sign any OFFER TO LEASE without a lawyer.

Now, I know what you’re thinking.

We’re a law firm, so of course, we’re going to recommend getting a lawyer to review the terms and conditions of your lease.

But what if I told you that commercial leases are one of the areas where lawyers will actually help you save money… A LOT of money?

Don’t believe me?

Take a lot of some of the most common ways businesses lose money on their leases.

1. You Don’t Realise Negotiation Is An Option, So You Pay Too Much

Unlike residential leases, the rent specifications within commercial leases can and should be negotiated.

Landlords usually want to secure a longer lease term (3, 5, or even 10 years) and they may be willing to offer reduced rates (called a rent abatement), a rent-free period (of up to 12 months in some cases!) or fit-out contributions as a incentive for you to sign on.

2. You Get Slapped With Crazy Rent Hikes

If your annual rent review (fixed rent increases) uses a fixed percentage you could end up paying way too much rent within a few years.

A commercial lawyer with experience in commercial leases can help you assess the attractiveness of a fixed percentage increase or even recommend market reviews when appropriate. Frequently our clients can expect to have up to 2 percentage points reduced from initial review rates.

3. Your Competitors Move In On Your Turf

The success of many businesses (especially retail) is often hinged upon their physical proximity to their competitors.

A lawyer can help negotiate exclusivity clauses into the lease that prohibit your landlord from letting your competitors set up shop in the same complex.

4. You End Up Paying for Their Lawyers

Often landlords will include a clause in the agreement that says you’ll have to pay for the costs they incur while preparing and/or enforcing the lease.

A lawyer can help you negotiate out of this cost.

5. You Go Broke

In much the same way that residential leases require a bond, commercial leases also need some form of security from the tenant, such as a bank guarantee or a personal guarantee.

A lawyer can help you understand the serious risks of personally guaranteeing a lease.

And, if these risks are too great for you to take on, they will also help negotiate a suitable compromise with the landlord that avoids putting all of your assets (such as personal property) on the line. This could be as simple as agreeing on an additional bank guarantee.

With proper structuring, you won’t have to worry about going broke and losing your real estate assets if you default on your lease.

6. You Get Kicked Out

Planning on staying a while? If your lease doesn’t include an option to renew, your landlord will be well within their rights to give your business the boot once the original lease has expired (even if they swear they won’t).

A lawyer can help you draft an option to renew that will allow you to continue leasing on similar terms. They will also give you specific renewal instructions so that you get all the paperwork filed according to the correct procedures and within the required timeframes.

Are you currently reviewing a commercial lease and need help making sense of it all? Feel free to email your queries through to Kevin, our resident commercial property expert. Just shoot a message to k.zhang@phoenix-law.com.au or call Phoenix Law & Associates on 07 3607 3274. We’ll help you save money and make sure you rent on your terms.

Kickstarter, GoFundMe and other crowdfunding platforms have exploded in popularity in the past five years, and it’s essential for anyone running a campaign to know how the Australian Taxation Office (ATO) views the money involved.

There are four main crowdfunding models: Donation-based, reward-based, equity-based, and debt-based. Because debt-based and equity-based crowdfunding schemes are not widespread in Australia, they’ll be left out of this article. Instead, we’ll focus on how the two most popular types – donation-based and reward-based crowdfunding – are taxed.

Which types of crowdfunding are taxed?

Donation-based Funding

This funding is entirely philanthropic. Money raised in these campaigns is used for official charity appeals or to finance causes like a child’s medical treatment or a family funeral. If you seek donations to help with a charitable cause and you aren’t making a profit, then the funds you receive are usually not taxable.

Reward-based Funding

This is where the person seeking funding promises to give the funder something in exchange for their backing. These rewards are commonly organised under tiers. For example, if you give $500, you might get one of the advertised products early. If you give $1000, you might get two of the products early and a discount.

These sorts of funding ventures are almost always subject to tax. If you are trying to bring a commercial product to market, then the funds you receive will most likely be taxable income. If you are providing goods or services in exchange for funding, you may also have to pay GST.

Crowdfunding is an exciting new way for charities and businesses to access money and for individuals to support projects and causes they care about. But, like most innovations, it’s only a matter of time before closer attention is paid to the legal issues like taxation.

To speak to one of our business law experts about legally crowdfunding your next idea, or if you have an enquiry regarding any other area of commercial law, contact Phoenix Law on 07 3607 3274 or info@phoenix-law.com.au.

Grit, determination and the right amount of funding aren’t all that it takes to successfully go into business with someone. No matter how solid your partnership may seem at the outset, you need to nut out a few basic legal agreements before you start operating a business together.

This month we asked business owners what they wish they’d done before partnering – and their answers all revolved around one thing: Partnership agreements

1. Detailed Job Descriptions

You wouldn’t start a new job without a clear outline of what your responsibilities are going to be, and entering into a business partnership is no different.

The number one thing the business owners we polled said they wish they’d done differently was creating a partnership agreement with specific job descriptions and KPIs. 

From angel investors with no hands-on responsibilities to partners using their skills in the day-to-day operation of the business, all parties must have a clear understanding of what’s expected of them from the outset and what will happen if they fail to meet their obligations.

2. Mandatory Background Checks

Knowing who you’re going into business with is said to be more important than knowing who you’re marrying – especially if you’re a general partner with unlimited liability!

The business world is littered with people who didn’t realise the type of person they were partnering with until it was too late. Including a stipulation that requires partners to undergo police, background and credit history checks is a simple way to lower your chances of being taken for a ride.

3. Exit Strategy

People new to the business world have a bad habit of viewing an exit strategy as a sort of prenup – if we create one, we’re just setting ourselves up for failure. However, in reality, there are many reasons why someone might want to exit the partnership, and they have nothing to do with failure! Families can grow or fall apart, new opportunities in different cities and countries present themselves, health changes, and sometimes business just isn’t what one of the partners expected it to be.

It’s crucial for all partners to understand and agree to a set of rules governing how the partnership may be dissolved including:

• How partners can retire
• What the business will do in the event of a death, permanent injury, bankruptcy or divorce of a partner, and;
• How a partner that doesn’t tow the line can be expelled

If you need a partnership agreement drawn up or simply want more advice on business structures and partnerships, contact Phoenix Law & Associates on 07 3607 3274 for a confidential discussion, or email us at info@phoenix-law.com.au.

Vendor – Why is the business being sold?
Costs – What variable and fixed costs will there be?
Profits – Do previous financial statements show that the business is profitable?
Assets – What assets are owned by the business?
Liabilities – Does the business have any outstanding or substantial debts?
Tax – Always ensure that GST, Capital Gains Tax, and stamp duty implications are in the equation when drafting a business plan
History – What has and hasn’t worked in the business in the past?

Purchasing a business is a far more complex and serious transaction than most others, a small or careless decision can leave you financially damaged. Luckily the skilled team at Phoenix Law can advise you throughout and ensure that you avoid common mistakes.