Risk management is a process in which businesses identify, assess and treat risks that could potentially affect their business operations.

What is a risk?

A risk can be defined as an event or circumstance that has a negative effect on your business, for example, the risk of having equipment or money stolen as a result of poor security procedures. Types of risk vary from business to business.

You must decide on how much risk you are prepared to take in your business. Some risks may be critical to your success; however, exposing your business to the wrong types of risk may be harmful.

The most common business risk categories are:

• strategic – decisions concerning your business’ objectives
• compliance – the need to comply with laws, regulations, standards and codes of practice
• financial – financial transactions, systems and structure of your business
• operational – your operational and administrative procedures
• environmental – external events that the business has little control over such unfavourable weather or economic conditions
• reputational – the character or goodwill of the business.

Others include health and safety, project, equipment, security, technology, stakeholder management and service delivery.

Preparing a risk management plan

Your risk management plan should detail strategies for dealing with risks specific to your business. It’s important to allocate time and resources to preparing your plan to reduce the likelihood of an incident affecting your business.

You can develop a risk management plan by following these four steps.

Preparing a business continuity plan

Unexpected events such as natural disasters or loss of key staff can impact your ability to run your business. As your business is critical to your financial wellbeing, it is important to plan for these events so you can respond and recover quickly.

A business continuity plan generally includes:

• A detailed list identifying risks that could disrupt your business.
• Actions to be taken if the unexpected event occurs.
• A list of key staff and stakeholders and their specific roles in relation to the plan.
• Plans for a relocation strategy if your premises should be inaccessible.
• Emergency contact telephone numbers.
• Details of where first aid and key documents are stored.
• A list of key documents such as insurance policies and financial records that need to be retrieved if the plan is activated.
• A communication plan to broadcast key message about the disruption.
• A guide as to when the plan is to be activated.

Intellectual property (IP) represents the property or creations of your mind or intellect.

If you develop a new product, service, process or idea it belongs to you and is considered your IP. You must formally register your IP to ensure legal ownership.

More information

• Visit the IP Australia YouTube channel and online resources
• Use IP Australia's free TM Checker tool to see if your IP is available to be trademarked
• Find a patent or trademark attorney

There are many aspects of running a small business that may require you to hire a lawyer to obtain legal advice.

These include:

• understanding, negotiating and developing business contracts
• reviewing and negotiating a lease for business premises
• determining your business structure
• buying or selling a business
• dealing with disputes or disagreements.

Good legal advice can help you protect your business interests and comply with legal obligations.

To ensure you get the best advice and representation, select a lawyer that:

• has experience and expertise in dealing with your legal issue
• can communicate clearly using simple language
• is easily accessible
• you feel comfortable with
• charges fees that are reasonable and acceptable to you.

Pro bono (free) or low cost legal support may be available for businesses that meet strict eligibility criteria and are unable to afford full cost legal advice. The John Curtin Law Clinic, part of Curtin University’s Law School, provides free legal advice and assistance. It is prepared by final-year law students and reviewed by qualified and experienced legal practitioners. Details of other free and low cost service providers are available from the Law Society of WA.

Your time with a free or low cost legal service will be limited. We suggest you contact us first, so we can help you to prepare for your appointment and gain the most benefit.

Visit the Law Society of WA website to find a lawyer.

A business contract is a legally binding agreement between two or more persons or entities.

Contracts can be complex. It is important that you fully understand the terms of a contract before signing anything. You are advised to seek legal and professional advice first.

Understanding business contracts

Dealing with contracts is part of running a small business. You will have a number of business relationships involving some type of contractual commitment or obligation.

You may:

• be a purchaser of goods and services - as a borrower of money, in rental agreements and franchise agreements
• be a supplier of goods and services – retailer, wholesaler, independent contractor
• have a partnering agreement with other businesses – partnerships, joint ventures, consortium. Managing your contracts and business relationships is very important.

Verbal and written contracts

Contracts can be verbal (spoken), written or a combination of both. Some types of contract such as those for buying or selling real estate or finance agreements must be in writing.

Written contracts may consist of a standard form agreement or a letter confirming the agreement.

Verbal agreements rely on the good faith of all parties and can be difficult to prove. It is advisable (where possible) to make sure your business arrangements are in writing, to avoid problems when trying to prove a contract existed.

Regardless of whether the contract is verbal or written, it must contain four essential elements to be legally binding.

Essential elements of a contract

For a contract to be legally binding it must contain four essential elements:

• an offer
• an acceptance
• an intention to create a legal relationship
• a consideration (usually money).

However it may still be considered invalid if it:

• entices someone to commit a crime, or is illegal
• is entered into by someone that lacks capacity, such as a minor or bankrupt
• was agreed through misleading or deceptive conduct, duress, unconscionable conduct or undue influence.

General terms and structure of an agreement

There is no specific format that a contract must follow. Generally it will include some terms, either expressed or implied, that will form the basis of the agreement. These terms may outline contract conditions or contract warranties.

Contract conditions are fundamental to the agreement. If the contract conditions are not met it is possible to terminate the contract and seek compensation or damages.

Contract warranties are less important terms and not fundamental to the agreement. You cannot terminate a contract if the warranties are not fulfilled, however, you may be able to seek compensation for any losses incurred.

When negotiating the contract terms make sure the conditions of the contract are clearly defined and agreed to by all parties.

Contracts may follow a structure that can include, but are not limited to, the following items:

• details of the parties to the contract, including any sub-contracting arrangements
• duration or period of the contract
• definitions of key terms used within the contract
• a description of the goods and/or services that your business will receive or provide, including key deliverables
• payment details and dates, including whether interest will be applied to late payments
• key dates and milestones
• required insurance and indemnity provisions
• guarantee provisions, including director’s guarantees
• damages or penalty provisions
• renegotiation or renewal options
• complaints and dispute resolution process
• termination conditions
• special conditions

Standard form contracts and unfair terms

A standard form contract is a pre-prepared contract where most of the terms are set in advance with little or no negotiation between the parties. These contracts are usually printed with only a few blank spaces for adding names, signatures, dates etc.

Examples of standard form contracts can include:

• employment contracts
• lease agreements
• insurance agreements
• financial agreements

Standard form contracts are generally written to benefit the interests of the person offering the contract. It is possible to negotiate the terms of a standard form contract. However in some cases your only option may be to ‘take it or leave it’. You should read the entire contract, including the fine print, before signing.

If you intend to offer standard form contracts you must not include terms that are considered unfair. This could include terms that:

• allow one party (but not another) to avoid or limit their obligations
• allow one party (but not the other) to terminate the contract
• penalise one party (but not another) for breaching or terminating the contract
• allow one party (but not another) to vary the terms of the contract.

There are laws protecting consumers from unfair contract terms in circumstances where they had little or no opportunity to negotiate with businesses (such as standard form contracts).

Unfair contract terms and small businesses

A law protecting small businesses from unfair contract terms in standard form contracts applies to contracts entered into or renewed on or after 12 November 2016, where:

• it is for the supply of goods or services or the sale or grant of interest in land
• at least one of the businesses employs fewer than 20 people
• the price of the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.

Read our guide on unfair contract terms for more information.

If you are experiencing unfair contract terms, you can anonymously report the issue to the SBDC for investigation.

Before signing a contract

Before you sign a contract:

• read every word, including the fine print
• ensure that it reflects the terms and conditions that were negotiated
• seek legal advice
• allow plenty of time to consider and understand the contract
• don’t be pressured into signing anything if you are unsure
• never leave blank spaces on a signed contract – cross them out if you have nothing to add so they cannot be altered later 
• make sure that you and the other party initial any changes to the contract
• obtain a copy of the signed contract for your records.

Once you’ve signed a contract you may not be able to get out of it without compensating the other party for their genuine loss and expenses. Compensation to the other party could include additional court costs if the other party takes their claim against you to court. Some contracts may allow you to terminate early, with or without having to pay compensation to the other party. You should seek legal advice if you want to include an opting-out clause.

Ending a contract

Most contracts end once the work is complete and payment has been made. Contracts can also end:

• by agreement – both parties agree to end contract before the work is completed.
• by frustration – where the contract cannot continue due to some unforeseen circumstances outside the parties’ control.
• for convenience – where the contract allows a party to terminate at any time by providing notice to the other party.
• due to a breach – where one party has not complied with an essential contract condition, the other party may decide to terminate the contract and seek compensation or damages.

If a contract warranty or minor term has been breached it is unlikely that it can be terminated, though the other party may seek compensation or damages.

Some contracts may specify what will be payable if there is a breach. This is often called liquidated damages.

If there is a dispute regarding the contract it is important both parties communicate clearly to attempt to resolve the matter. You may consider using our low-cost dispute resolution service or seek legal advice to help resolve your dispute.

More information

• Read the Prepare a contract guide on the Business.gov.au website
• Visit the ACCC website for information on contracts

The Competition and Consumer Act 2010 (CCA) covers the relationships between suppliers, wholesalers, retailers and customers.

Its purpose is to promote fair trading and competition, and provide protections to customers. The CCA covers:

• product safety and labelling
• unfair market practices
• price monitoring
• industry codes
• industry regulation – airports, electricity, gas, telecommunications
• mergers and acquisitions.

The Australian Consumer Law (ACL), which is contained in a schedule to the CCA, includes specific clauses relating to the treatment of customers.

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the CCA. In Western Australia, other legislation to protect customers is regulated by the Consumer Protection unit at the Department of Energy, Mines, Industry Regulation and Safety.

If you intend to sell products or services you will need to be familiar with your rights and obligations under the CCA. These may include:

• ensuring standard form contracts do not have unfair terms
• honouring customer guarantees
• ensuring the safety of products and services
• complying with rules on sales practices (such as price, customer information, lay-by agreements and unsolicited customer agreements).

More information

• Read the ACCC publication Small business and the CCA
• Sign up to the ACCC Small Business Information Network to receive updates
• Consumer Protection provides a range of ACL information resources
• Visit the Business.gov.au website for information on managing customer relationships

There are legal obligations for most small businesses. They will vary depending on the nature of the business.

To avoid problems in the future it is important to understand your obligations. It is recommended that you seek legal and business advice before starting your business.

Business structure and registrations

Your business structure will determine which tax registrations you need, in addition to your personal liabilities.

You are responsible for ensuring you have the correct business registrations and that they are maintained and renewed.

Your tax requirements may include registering for goods and services tax (GST) and pay as you go (PAYG) withholding, and reporting to the Australian Tax Office (ATO). Read more about business structures and tax requirements.

Selling goods and services

If you sell goods and services you will need to comply with the Competition and Consumer Act 2010, which also includes the Australian Consumer Law (ACL). The ACL outlines specific protections for consumers against unfair business practices.

These include:

• ensuring standard form contracts do not have unfair terms
• honouring customer guarantees
• ensuring the safety of products and services
• complying with rules on sales practices (such as price, customer information, lay-by agreements and unsolicited customer agreements).

Small retail shops are generally able to trade 24 hours a day, however in some cases the type of business can dictate the hours that it can open. Find out more about retail trading hours from the Department of Energy, Mines, Industry Regulation and Safety.

Contracts

A contract is a legally binding agreement between two or more people. It may be between you and another business or you and your customer. It is important to understand your obligations relating to contracts.

Leasing premises

In Western Australia, retail shop leases must comply with the Commercial Tenancy (Retail Shops) Agreements Act 1985. It is important to seek legal and business advice before negotiating a commercial lease.

If you operate your business from home, you will need to register with your local council and seek their approval.

Employing staff

If you employ staff you will have a number of additional obligations. These may include:

• workers’ compensation insurance
• establishing and maintaining a safe workplace
• pay and employment conditions
• tax and superannuation
• keeping employee records
• leave entitlements
• equal opportunity laws
• injury management.

Read more about employer obligations.

Work Health and Safety (WHS)

You have a duty of care to the health and safety of your staff, contractors, customers and the general public. WorkSafe WA has developed information and resources to assist small businesses to comply with their WHS obligations.

Privacy and information protection

Most small businesses will not have to comply with the Privacy Act 1988, however there are exceptions. A small business with an annual turnover of $3 million or less will have to comply if it is:

• a health service provider (eg. medical practitioner, pharmacist, chiropractor, gym, child care centre)
• trading in personal information (eg. buying or selling a mailing list)
• a contractor that provides services under a Commonwealth contract
• an operator of a residential tenancy database
• a credit reporting body
• business that are related to a business that is covered by the Privacy Act.

More information is available from the Office of the Australian Information Commissioner.

Intellectual property

Protect your intellectual property (IP) to ensure you retain your exclusive legal rights to it. It is also important not to use someone else’s IP in your business without their permission.

More information

Seek advice from a qualified lawyer or contact the Law Society of WA

A lease can end for reasons including expiry, redevelopment, default or termination by mutual agreement.

Lease term has expired and there are no options to renew

Unless otherwise agreed you must vacate the premises when your lease term has expired and any options to renew the lease have been used. Usually you will have to vacate the premises by a certain date or start negotiating a new lease. A new lease may have different terms and conditions, including higher rent.

If you want to stay in the current premises, you should write to your landlord (or their agent) well before the lease expires to determine whether they will renew it and what the terms and conditions will be. This will give you time to consider your options and look for alternative premises if you can’t renew the lease.

In some circumstances, you may be allowed to stay in the premises after your lease has expired, paying rent on a fortnightly or monthly basis. This is known as a periodic lease.

A periodic lease does not give you the same protections as a fixed term lease. For example, at any time the landlord for most periodic leases can give you one month written notice to vacate the premises.

Make good requirements

When you leave the premises you will generally be required to reinstate them to the condition they were in at the start of your lease. This is commonly referred to as ‘make good’. Check for any make good clauses before you reach the end of your lease and understand your obligations.

Make good clauses can require the tenant to remove any fixtures or fit-out belonging to them, repair any damages, replace carpets, repaint walls and clean the premises. Your lease should specify what you are required to do, and allow for normal wear and tear. If you obtained a property condition report at the start of your lease you can refer to this as part of the make good.

You should allow sufficient time at the end of your lease to complete the make good requirements.

Failure to agree may result in the landlord withholding your bond or charging you additional costs, such as repair and cleaning costs.

Read our tips on how to make good at the end of your lease to find out more.

Bond and guarantee

Once you have completed your make good and vacated the premises you should receive your bond and/or guarantee release back from the landlord.

The lease may allow for the landlord to use or withhold the bond under certain conditions. Check your lease to determine whether you agreed to a certain timeframe to have your bond returned after vacating the premises. If your lease does not state a timeframe, the landlord should return the bond as soon as is reasonably possible.

Redevelopment of premises

A redevelopment clause may allow the landlord to terminate a lease early in order to carry out major works to renovate or redevelop the premises. In these circumstances you could find yourself without premises. This could have a severe impact on your business, particularly if your goodwill is attached to your location.

If you have agreed to a relocation clause in your lease, check to see whether you negotiated to be paid compensation for loss of trade and to cover your relocation costs.

Default due to non-payment of rent

If a tenant defaults in paying the rent on time most leases allow the landlord, without notice to the tenant, to terminate the lease and take possession of the premises.

You may find yourself unable to trade or enter the premises to collect your belongings. You can negotiate with the landlord to access the property to collect your belongings, generally, they can’t keep or sell your belongings unless specified in the lease. If you don’t claim them it’s likely the procedure outlined in the Disposal of Uncollected Goods Act 1970 will be followed.

Your lease should cover written notification of a default and the action that will be taken if it is not fixed within a reasonable time period. The landlord generally has the right to recover from you all the monies, including interest, owing up to the end of the lease.

Termination by mutual agreement

It is possible for the landlord and the tenant to mutually agree to terminate the lease early. This may be in circumstances where it benefits both parties. If you need to terminate the lease early, you should discuss this with your landlord. They are not obliged to release you from your agreement but may be willing to negotiate if you are facing serious financial difficulties or other circumstances beyond your control.

If problems arise during the term of your lease, you should attempt to resolve these with the landlord (or their agent) as soon as possible. Informal discussions may help both parties find a workable solution.

If possible, it is a good idea to refer to the lease as this will usually set out what each party is required to do under the lease.

If you cannot resolve the problem or dispute with the landlord, you may consider using our dispute resolution service. This service is easy to access, affordable and generally resolves disputes quickly allowing you to get back to running your business sooner. This is an alternative to court; however that option is always open to you.

Leases regulated by the Commercial Tenancy (Retail Shops) Agreement Act 1985

Under the CT Act, the Small Business Commissioner’s role is to provide assistance to attempt to resolve disputes relating to retail shop leases. Both tenants and landlords can approach us for assistance to resolve their dispute. Depending on the nature of the dispute, it may be appropriate for the dispute to be referred to mediation.

In most circumstances, parties wanting to apply to the State Administrative Tribunal (SAT) must first obtain a certificate from the Small Business Commissioner and include this with their application.

Parties may go directly to the SAT for certain administrative or urgent matters. Use the SAT Wizard to determine whether you need to obtain a certificate from the Small Business Commissioner.

Claiming compensation for business disruption

You may be entitled to compensation if the landlord of your building has undertaken work that has disrupted your business.

Generally, a landlord can carry out works or redevelop their premises if it is permitted by your lease. However they must take all reasonable steps to minimise disturbance to you and your business.

If you have a retail shop lease, you need to check the disclosure statement given to you at the start of the lease to see whether the landlord had advised that work would be undertaken during the term of your lease. (You must be provided with a disclosure statement before you enter into your new retail shop lease.)

If your business has been impacted, read our guide on How to claim compensation for disruption caused by landlord’s works.

Before entering into a lease you will have an opportunity to negotiate with the landlord (or their agent) to reach an agreement that meets your business needs.

It is important to understand and consider some key leasing matters before starting negotiations.

It is important to seek financial, legal and business advice before entering into a lease and that you understand your rights, liabilities and obligations.

What can I negotiate?

In theory everything is negotiable. Rent, term of the lease, options to renew, operating expenses and related costs can be negotiated with the landlord. Negotiations could require you to go back and forth with the other party. Be prepared to allocate sufficient time to negotiate. Do not be pressured into signing a lease without first seeking legal, business and financial advice.

Usually a lease will be prepared by the landlord’s solicitor and contain terms and conditions that are acceptable to the landlord. The extent to which these terms and conditions can be negotiated will depend on a range of factors including:

• competition or demand for the premises
• the landlord’s financial situation
• your desirability as a tenant; this may include your potential to meet your obligations, or to attract clients or other tenants to the location or the landlord’s future intentions for the premises

Before starting negotiations seek financial advice to work out how much you can afford to spend on leasing the premises. You should also consider the terms and conditions of the lease and what you are prepared to accept.

Think about engaging someone with experience in leasing business premises to help you negotiate your lease, particularly if you are not good in face-to-face negotiations.

Negotiating a good lease is vital to the success of your business. Some key negotiation tips include:

• be clear on your financial bottom line before you start negotiating (but don’t share the information with the other party)
• don’t let your emotions interfere with negotiations
• allow sufficient time to consider the terms and conditions of the lease to identify what is acceptable and what is not
• seek legal, financial and business advice on the lease
• ensure that everything discussed and agreed is put in writing - take nothing on trust
• be prepared to walk away from negotiations if necessary

Terms and conditions of a lease

The terms and conditions of your lease are critical to the success of your business. Getting these right from the beginning will help safeguard against future problems or issues.

Generally, terms and conditions of a lease should provide:

• security of tenure for the desired time
• an affordable rent for the duration of the lease
• provisions (clauses) that will not interfere with the day-to-day running of the business or impose excessive financial burdens
• the ability to operate a profitable business
• protection from competition; this is particularly important if the premises are in a shopping centre or group of shops owned by the same landlord.

Our publication How to negotiate your way to a better retail lease explores these matters in more detail.

Main issues to consider

Some of the key terms and conditions typically included in a lease are:

• lease duration (or term) and options to renew
• rent and rent reviews
• permitted use
• tenancy mix and competition
• fixtures and fit-out
• costs
• repair and maintenance
• assignment and sub-leasing
• default and breaches
• redevelopment and relocation
• termination

Our information on understanding commercial leases provides more detailed information about each of these matters - familiarise yourself with them before starting negotiations.

In Western Australia, most retail shop leases are regulated by the Commercial Tenancy (Retail Shops) Agreements Act 1985.

Having an understanding of the Act is essential if you intend to lease premises to operate a retail business.

This information is intended as a guide and it does not replace the need to seek independent legal, financial and business advice before signing a lease or associated documentation, paying rent or other monies, or occupying the leased premises.

The Act was amended in recent years and these amendments came into effect from 1 January 2013. Not all of these amendments apply to leases entered into before this date. We have produced a series of commercial leasing publications (available to download below) to answer common questions about the Act specific to those leases entered into after 1 January 2013.

Retail shops covered by the Act

The Act generally applies to leases for premises with a lettable area of 1000 m² or less and that are:

• used for carrying on a business and are in a retail shopping centre (or a group of premises, of which five or more are used for the sale of goods by retail or a specified business)
• not in a retail shopping centre, but that are used (or predominantly used) for the sale of goods by retail or
• used for conducting a ‘specified business’

The regulations set out what is classed as a 'specified business' as at 1 January 2013, these are:

• dry cleaning
• hairdressing
• beauty therapy and treatments
• shoe repair (which may include key cutting and engraving)
• sale or rental of videos tapes, DVDs, electronic games and other similar amusements

The Act allows for some retail shops with a lettable area greater than 1000 m² to also be covered by the Act. As at 1 January 2013 no shops had been included.

The Act does not apply to leases:

• to publicly listed companies
• of premises for the purpose of operating only a vending machine or automatic teller machine.

Purpose of the Act

The purpose of the Act is to:

• regulate commercial tenancy agreements in relation to retail shop leases
• provide access to alternative low-cost mediation and dispute resolution services
• prohibit unconscionable, misleading and deceptive conduct in relation to retail shop leases

The Act principally focuses on the need for transparency of information and fairness in the lease by:

• requiring the landlord to provide a disclosure statement and tenant guide to the tenant
• establishing a consistent and fair process for rent reviews
• including special requirements regarding the payment of turnover or percentage rent
• giving most tenants an entitlement to a minimum lease period of up to five years
• regulating the distribution of specified landlord expenses (operating expenses) to tenants
• providing certain provisions in a lease to be void – for example, a provision requiring the tenant to open during specified times
• requiring landlords to give tenants notice of the date on which an option to renew a lease is no longer exercisable
• prohibiting landlords from passing on some of their legal fees to tenants

The Act requires a landlord to provide to a tenant the following documents when a lease is being considered:

• a disclosure statement
• a tenant guide (must be attached to the front of the lease and included with the disclosure statement)
• a proposed lease
• an operating expenses budget

These documents should be provided to the tenant at least seven days before entering into the lease.

Trading hours

The Act prevents leases from including a clause which requires the shop to be open for specified hours or times.

Resolving disputes

Under the Act, the Small Business Commissioner’s role is to provide assistance to attempt to resolve disputes relating to retail shop leases. Both tenants and landlords can approach us for assistance to resolve their dispute. Depending on the nature of the dispute, it may be appropriate for the dispute to be referred to mediation. You can learn more about our dispute resolution service.

In most circumstances, parties wanting to apply to the State Administrative Tribunal (SAT) must first obtain a certificate from the Small Business Commissioner and include this with their application.

Parties may go directly to the SAT for certain administrative or urgent matters. Use the SAT Wizard to determine whether you need to obtain a certificate from the Small Business Commissioner.

More information

• Visit the Department of Energy, Mines, Industry Regulation and Safety website for information on commercial tenancy agreements.