The widespread availability of “free” legal information online, along with the growing use of AI tools for legal guidance and the increasing cost of professional services, can lead investors and businesses to believe they can forego expert legal advice.
However, this assumption can be costly.
Set out below are five good reasons why consulting a lawyer upfront can save you money down the road, and real examples of where we have seen costly mistakes made that could have been avoided with some appropriate legal advice.
1. Not getting adequate advice on how to structure your business
Depending on what you want to achieve in your business, how you intend to grow it, finance it, and ultimately exit, you will need to thoroughly consider an appropriate business structure – that will endure over the full lifecycle of the business.
This can be the single most important piece of advice that you receive when starting a business. Getting adequate and appropriate advice can save you thousands of dollars and hours of stress.
For example:
If you start your business as a sole trader, and later want to transfer the business into a company or a company acting as a trustee for a trust, there are likely to be significant stamp duty and CGT issues involved in that transfer. It may be possible to mitigate these costs by selecting a more appropriate business structure from the outset.
Depending on your particular business, you will need to consider what is the best entity to own your equity in the business, taking into account asset protection issues, succession planning, administration costs, and taxation planning.
Common business structures include sole trader, partnership, joint venture, discretionary trust, unit trust, hybrid unit trust, a company limited by shares, a company limited by guarantee, or a combination of the above structures. Which one should you choose? Well that depends on a raft of issues, including the type of business you are planning to operate, what your business does, what the key assets of your business are and what your long term plan is for the business (to just name a few).
Don’t let fate determine whether you have set up the best structure for your business. Let us advise you and help you start with your best foot forward. Email us or give us a call on 1300 654 590 to get started.
2. Do-it-yourself documents, or buying documents from a ‘document shop’
A common error that businesses make is to rely on management to negotiate and draft legal documents, or to acquire documents from a ‘document shop’. In the modern age, we are seeing more and more managers using AI tools to interpret and negotiate legal documents.
This presents a number of dangers, including:
- Management often do not have the time or expertise to know what the common and more subtle risks and consequences are when entering into an agreement;
- While document shops can provide a good service if reviewed by a suitable lawyer, the base documents may not be adequately customised to suit your business’ particular situation; and
- AI tools are only as good as their training is. You cannot be sure whether guidance provided by an AI tool is appropriate for the jurisdiction, scenario or context you are operating in.
If you are relying on a document shop, ensure you know which lawyer drafted the base document that you are buying, and ensure that the document is adequate for the purpose that your business is using it for.
If the document, contract or negotiations are high-value for your business, then investing in appropriate legal advice will not only give you peace of mind, but the confidence to move forward with the deal.
3. Relying on service providers who are not qualified to provide legal advice
When making a critical business decision, business owners may rely on a review of documents or strategic advice from their accountant or financial planner. While the input of these professionals is essential, it does not extend to a review of the legal aspects of the documents. Furthermore, these advisors are not insured to provide legal services, and hence you will have only limited recourse in the event they miss something.
Building the right team to advise you on a deal, opportunity, or dispute is important. In our experience, trying to substitute or short-cut advice by relying on another adviser to give quasi-legal advice is a recipe for disaster.
We stick to our knitting and provide comprehensive and clear legal advice, we happily collaborate with your other professional advisors to ensure you are truly informed before making any decision which can have either immediate or future impact on your business. Let us join your team. Email us or give us a call on 1300 654 590 to get started.
4. Appropriate party identification on contracts and understanding your rights
When entering into a contract, one of the first things that needs to be checked is the parties to the contract. What are the obligations and risks being distributed in the contract, and are the right parties bound to assume a level of risk and responsibility? For example, is Jane Doe engaging Joe Bloggs personally to provide a service, or is Jane engaging Joe’s company?
If the contract between Jane and Joe doesn’t pan out as either expects, what rights does either party have? Can either party get out of the contract? Can one party be substituted for another?
Knowing the answers to these questions up front can be the difference between setting yourself up for success, or staring down the barrel of a messy dispute. A well seasoned lawyer will be able to help verify the terms of your contracts, identify potential issues and talk through scenarios and consequences with you.
An example of where this can go wrong is when an ‘and/or nominee contract’ is used. These contracts are commonly used when the purchaser executes a Sale Contract. If you are purchasing an asset under such a contract, then you should ensure the entity that is eventually substituted as the nominee is established prior to the date of signing the contract, (although, the actual valid appointment of a nominee may differ from state to state). If this is not done properly, there can be “double stamp duty” issues on the purchase price or deposit. Firstly at the named purchaser level, and secondly at the nominee level. This is a very expensive problem that can be avoided with the right legal advice.
5. Understanding the legal and commercial outcomes of business decisions
Being able to foresee and understand potential legal and commercial consequences of business decisions can seem like an art form. Often experienced commercial and business lawyers have seen (almost) everything, and drawing on their expertise and experience can be a way to understand the big picture. As above, this can often be contract or scenario-specific. Sure, plugging in a scenario into an AI Bot might give you an idea of some of the broader issues that could occur. However, when details matter, engaging a legal expert is the only way to be sure that you aren’t caught with unexpected (and unintended) consequences.
For example, it is common for businesses that are not ‘income rich’ to issue equity (e.g. shares) in lieu of remuneration. The most common trap that occurs in this context is when the equity is issued at a “discount” to the market value of the shares. Simply put, this may mean that the Tax Office will assess the allottee of the shares on the difference between the market value of the shares and the lower value they were issued at – and the employer is liable to withhold PAYG.
A business should get advice prior to when they intend to issue equity to employees, so as to mitigate the potential for an up-front tax liability and withholding obligation to be triggered.
If you need legal advice, we are here to help. We offer clear and actionable legal advice to business owners and entrepreneurs, delivered in a way that lets you get back to doing what you do best (running your business!). We would love to help. Call us on 1300 654 590 or email us to hear how we can guide you.
The information contained in this post is current at the date of editing – 20 April 2026.
