Emily Pritchard answers your burning questions relating to duty and the establishment of trusts. […]
A world of DIY pain
Mick Nielsen, current as of: 12 October 2018.
Easy access to the internet-of-everything has bred a DIY mentality in the community where it seems cheaper and easier to do the job yourself rather than use a professional. In the world of business structures, Google will happily point your clients to an online template provider or ASIC to set up business structures, despite both options being problematic.
You may have noticed that ASIC recently launched its Business Registration Service. On the face of it, telling Australians they can cut red tape and simplify the process of starting a business makes perfect sense. Unfortunately, as we know, most of your clients aren’t experienced enough to fully understand the complexities involved in setting up business structures.
This conversation has been bubbling around the industry for a while, and we’ve had quite a few of our adviser clients requesting materials to provide to their clients outlining DIY risks. Acis only deals with professional advisers because we know that consumers need advice before they get involved in business structures.
DIY is a false economy
We understand that clients are often focussed on the costs involved with establishing a structure, and it’s not always easy to convince them the DIY approach is a false economy.
While ASIC might be the cheapest option for your client, the outcome is unlikely to be as desirable. They will receive no documentation other than a registration certificate, leaving them to navigate the Corporations Act for themselves.
In some cases, banks will request a company’s constitution or will require a consent to act and share certificates. Registering directly with ASIC, you will not be provided with the documentation that you require. This will come with the inconvenience and additional cost of having to purchase the necessary documents after company registration.
Although the dangers may seem fairly obvious, it’s the professional advisers who are left trying to unravel the mess:
- Is the overall structure right?
- What’s missing from the legal documents?
- Are the right people and entities involved?
What many of your clients don’t realise is that you will need to review any structure they bring to you so that you fully understand its operation. So a cheap DIY job will likely end up an expensive option for both you and your client.
Can you trade with your registered company name?
We’ve written before about the potential for business owners to register a company name and commence operations, only to find out they are not entitled to trade under it.
Again, ASIC can’t be relied on to protect their interests. ASIC will register any name that isn’t identical to an existing one purely for identification purposes and doesn’t give a right of ownership. Registration with ASIC just means that nobody else is “using” an identical name and the name is not undesirable or a restricted word.
The issue with this is that trade mark conflicts are not considered. Trade mark infringement could cause a great deal of trouble for your clients, and innocent or unintentional infringement is no defence.
To provide an additional layer of protection, we have launched a service enabling you to commence a trade mark search at the time of ordering a company. You will now see this available during the ordering process.
We’ve produced a couple of fact sheets for you to provide to clients you think are leaning towards doing it themselves. It’s not always an easy conversation, but we all understand how critical it is.