Funding your Australian business and the legal steps for each funding option

You have a product people want and customers asking for more, but the bank balance says no. Or the business you want to buy goes to market in six weeks and the deposit is due tomorrow. However you got here, the next step is raising money, and the way you raise it is also a choice about the legal structure of your business. That is the part most founders discover late, usually after they have promised an investor something they cannot deliver.

Which funding routes are actually open to you?

The realistic options fall into a few buckets, and they differ in what they cost you: ownership, control, or just interest.

Non-dilutive money: Your own savings, customer revenue and government grants. Nothing is sold and nothing is owed, but grants carry strict eligibility and reporting conditions, and revenue takes time you may not have.
Debt: Bank loans, equipment finance, private loans from family or friends, and vendor finance when you buy a business. You repay principal plus interest, the lender takes security but no ownership, and if you borrow personally or guarantee the debt you can be on the hook.
Equity: Angels, venture capital and equity crowdfunding. You sell shares in exchange for capital and give up a slice of ownership and control.
Hybrid instruments: SAFE notes and convertible notes take money now and convert into shares later, at a future valuation. They sit between debt and equity but still end in shares.
Partnership and joint venture: A co-founder, investor or corporate partner contributes capital in exchange for a contractual stake or profit share, formalised in an agreement.

Which of these are open to you depends on your structure, and this is where the legal reality bites. You cannot issue shares as a sole trader or a partnership. Equity and hybrid funding require a company limited by shares: a proprietary company under the Corporations Act 2001 (Cth), with at least one director who ordinarily resides in Australia and no more than 50 shareholders (s 201A and s 113). If you think equity is on the cards, forming the company before you raise is nearly always cheaper and cleaner than converting afterwards, which can trigger tax and stamp duty consequences of its own.

What should be in place before you approach a lender or investor?

Lenders and investors fund plans, not promises. The preparation is the same regardless of path: a credible plan, a structure that fits, registrations in order, and paperwork that shows you run the business professionally. Expect to be asked for all of it before anyone writes a cheque.

A business plan that answers the obvious questions

What you sell and who buys it, the market and the competitors, how much you need and what it will be used for, the milestones the money unlocks, and 12 to 24 month financial forecasts. It does not need to be glossy. It needs to be credible, because the forecast is the first thing a lender stress-tests and the first thing an investor asks to see redone with their assumptions.

A structure that matches how you will raise

Each option trades control and simplicity against liability and fundraising capacity:

Sole trader: Simplest and cheapest, full control, but you are personally liable for business debts and you cannot sell equity.
Partnership: Shared control, but partners are generally personally liable for partnership debts unless the business is operated through a company.
Company (Pty Ltd): A separate legal entity with limited liability, and the only structure through which you can issue shares. It comes with ASIC registration, annual compliance obligations and, for new directors, the requirement to hold a director identification number applied for through the Australian Business Registry Services.
Trust or other entities: Sometimes used for tax or asset protection, but lenders and investors generally prefer to deal with a company. Get tailored legal and accounting advice before you commit.

Registrations and licences

The registrations funders and regulators check first are:

ABN: You generally need an Australian Business Number to issue tax invoices and deal with suppliers and government, and most trading businesses apply for one when they start.
Business name: Register with ASIC if you trade under a name other than your own or your company's. Registration records who owns the name; it does not give you exclusive rights to it. Only a registered trade mark does that.
Company records: If you are a company, keep the ASIC registers current, including directors, shareholders and your constitution or replaceable rules. A tidy record makes you easier to fund and removes delays when someone is ready to say yes.

The paperwork that proves you are organised

Beyond the registrations, funders expect to see documents that show the business is run professionally:

Customer terms: Cover pricing, delivery, returns, warranties and liability.
Supplier agreements: Lock in price, quality, delivery timeframes and termination rights.
Employment and contractor agreements: Include clear roles, confidentiality and IP ownership clauses.
Privacy policy: Have one if you collect personal information, and make sure your practices actually match it.

What legal steps does each funding path involve?

Each path has a set of legal steps that are not optional. Here is what each one actually involves.

Loans and other debt

A loan is a contract: the amount, the interest rate, the repayment schedule, events of default and what happens on breach. If the lender takes security over business assets, that security interest is registered on the Personal Property Securities Register (PPSR) under the Personal Property Securities Act 2009 (Cth). Registration matters more than borrowers realise. Under s 267 of that Act, a security interest that is not perfected by registration vests in the borrower if the business goes into liquidation or administration, which means the lender loses its security at exactly the moment it needs it.

Directors are also commonly asked for personal guarantees, and a guarantee makes the director personally liable for the debt if the company cannot pay. Family and friend loans should be documented the same way as bank loans: a written loan agreement setting out whether interest applies, repayment triggers and what happens if the timeline slips. That protects the relationship as much as the money.

Government grants

Grants are not loans and not equity; they are conditional money. Each program has strict eligibility criteria, application evidence and reporting obligations, and timeframes are long. The funding agreement will typically tie the money to milestones, publicity and audits, with repayment or clawback if the conditions are breached. Read the agreement before you accept the grant, not after the first audit letter arrives.

Equity investment

Chapter 6D of the Corporations Act 2001 (Cth) regulates how you can offer shares. As a general rule, an offer of securities needs a disclosure document such as a prospectus, unless an exemption in s 708 applies. The exemptions founders actually use are:

Small-scale personal offers (s 708(1)): You can raise from no more than 20 investors and up to $2 million in any 12 months, provided the offers are personal: made to people you have a genuine prior connection with, and only able to be accepted by the person you offered them to. Cross the ceilings and the offers that follow are made unlawfully (s 727(4)).
Sophisticated investors (s 708(8)): An offer to someone who invests at least $500,000, or who a qualified accountant certifies meets the income and assets test in the Corporations Regulations (broadly, net assets of at least $2.5 million or gross income of at least $250,000 in each of the previous two financial years), does not need disclosure.
Professional investors: Holders of an Australian financial services licence are also exempt.

The trap is publicity. Advertising and publicity in connection with securities offers are restricted (s 734), and the small-scale exemption only works for personal offers. A public post inviting people to invest can take the raise outside the exemption even when the amounts are small.

When you do take equity, the two documents that matter are the shareholders agreement, which governs decision-making, founder and investor rights, vesting, dispute resolution and what happens when someone leaves, and the share subscription agreement, which records the price, warranties and completion mechanics of the issue. If more than one person owns the company, the shareholders agreement is the document that stops the relationship from becoming a dispute.

Equity crowdfunding

Crowd-sourced funding (CSF) lets an eligible company raise small amounts from many retail investors through a licensed intermediary, under Part 6D.3A of the Corporations Act. Both proprietary and public companies can use it. The offer must be published on the intermediary's platform with a prescribed CSF offer document, applications are made to the intermediary, and the company must meet eligibility requirements that include having at least two directors when the offer is made (s 201A). The regime also caps how much a company can raise in any 12 months and how much retail investors can contribute, and those limits have been adjusted since the regime began, so confirm the current figures before you commit to a campaign.

Rewards-based crowdfunding, such as pre-selling products, is simpler because no securities are involved. But what you promise is still marketing, and the Australian Consumer Law applies to your delivery timelines, refunds and product claims.

Early-stage instruments

SAFE notes and convertible notes let investors put money in now with shares issued at a later round, so you can defer the valuation debate. They are still offers of securities, so the disclosure rules above apply unless an exemption fits, and in practice these instruments are usually offered to sophisticated or professional investors. The conversion triggers, valuation caps and discount rates decide how much of the company the investor ends up with, so those terms need to be written down precisely rather than left to a handshake.

Which compliance obligations kick in once the money arrives?

Taking money does not just fund the business. It brings the obligations that lenders and investors will check before they commit and regulators can check after.

Consumer law: If you sell goods or services, the Australian Consumer Law, which is Schedule 2 of the Competition and Consumer Act 2010 (Cth), applies. The consumer guarantees attach automatically to what you supply, unfair contract terms in standard form consumer and small business contracts are prohibited and attract penalties, and advertising must not be misleading or deceptive.
Privacy: The Privacy Act 1988 (Cth) (the Act) applies to most businesses with annual turnover above $3 million (s 6D). Below that threshold the small business exemption does not apply if you sell or trade personal information, provide health services, or fall within the other carve-outs in s 6D(4), so the assumption that a small business is automatically exempt fails more often than people think. If the Act applies, you need an APP privacy policy and handling practices that match it.
Employment: Hiring staff brings the Fair Work system: minimum pay, award coverage, leave, superannuation guarantee at the legislated rate and workplace safety obligations. Employment and contractor agreements with IP assignment clauses protect you as the team grows.
Tax: You must register for GST once your GST turnover reaches $75,000 or more, and you have 21 days to do it from the point you are required to register. Debt and equity are taxed differently, with interest generally deductible to the company and dividends not, and the way you structure a raise affects future tax events. Get advice before you sign, not after the first return is due.
Intellectual property: Investors ask who owns the IP. Make sure staff and contractors assign IP to the company in writing, and consider trade mark registration for the name and logo you will be marketing.

What's different when the funding buys an existing business?

Buying a business adds a second transaction to the funding one, and the two have to line up on the same settlement date.

Due diligence: Review the contracts, leases, assets, IP, employees, compliance history and any disputes or liabilities before you commit. This is what lets you price the deal properly and negotiate warranties that actually protect you.
Asset sale or share sale: Decide whether you are buying the business assets or the company's shares. The documents differ, the liabilities that transfer differ, and the tax treatment differs. The choice should be made with advice rather than assumed.
Consents and transfers: Rights do not move automatically. You may need landlord consent to assign a lease, novations of key supplier and customer contracts, licence transfers and lender consents. PPSR searches on the business assets tell you what security is already registered against them.
Vendor finance: Sellers sometimes lend part of the price. Document it like any other loan, with security and clear repayment terms, and make sure the repayment schedule fits the cash flow of the business you are buying rather than your optimism about it.

How Artificer Legal helps you structure and document the raise

The judgement calls in this article are yours to make with advice: which exemption your raise fits and whether your marketing stays within it, whether to raise debt or equity, which structure to use, and what the documents should say. An Artificer Legal practitioner can stress-test the plan before you approach anyone, review a term sheet before you sign it, and draft or review the documents your path needs: loan agreements and security documents, shareholders agreements, share subscription agreements, SAFE notes and convertible notes, privacy policies, and business sale agreements if you are acquiring. We also coordinate with your accountant on the tax side and with intermediaries on CSF and licensing questions. This article is general information, and your raise is specific. The documents you sign are the difference between a clean round and a dispute two years later.

The advertising rule that quietly decides whether your raise is legal

The rule that costs founders most is the one that seems least important: how you talk about the raise. The small-scale exemption only works for personal offers, and advertising and publicity for securities offers are restricted. A founder who posts an invitation to invest to a public audience can turn an otherwise exempt raise into an offer that needed a disclosure document, and an offer that needed one but did not have one can expose the company and its directors to penalties and give investors rights to unwind the investment. The amount raised is not the only test. The manner of the offer is. Check your marketing plan with the same care as your term sheet.

Funding an Australian business comes down to a handful of moves. Pick the bucket, whether non-dilutive, debt, equity or hybrid, that fits your structure and your appetite for control. Prepare a credible plan, the right entity and clean paperwork. Follow the legal steps for the path you choose, including the disclosure exemptions, PPSR registration and the CSF regime. Keep the compliance basics, consumer law, privacy, employment, tax and IP, in order. And if the funding is buying an existing business, add due diligence, consents and a funding mix that all settle on the same day. Get the structure and the documents right at the front and the round goes faster, cleaner and cheaper.