Software as a service, also known as SaaS is something we interact with pretty frequently. If you’ve watched a show on Netflix recently, typed something into Microsoft or used your email app, then you’ve been utilising SaaS. In simple terms, SaaS allows users to access software online instead of individually installing the software into each device.
So, if you’ve got a software you want to share with the rest of the world then you’re probably looking into building a SaaS business. Joining the tech world as an entrepreneur is an exciting step! Although, tech stuff aside, it’s important to understand the business-legal aspect of it all.
That way, you can give your SaaS business the best chance possible out there.
What Is A SaaS Business?
A SaaS business makes a profit by putting their software online for people to purchase and use. For the most part, we don’t go to a store and have someone manually install the apps we want into our phones. SaaS businesses allow users to access their software from the internet and utilise it through a subscription based model or a one off purchase.
Users are usually free to discontinue the service when they want and people are easily able to access the software, as it’s readily available online. In fact, most of the apps on your phone are considered SaaS.
How To Start A SaaS Business
If you want to start your own SaaS business, then aside from designing the right software you will need to legally register your business. In order to do this, the first step is to establish a legal structure for your SaaS business.
The three common types of legal structures are:
- Sole trader
Each structure is different when it comes to registration, management and liabilities, so it’s important to think carefully so you can choose one that will be right for your business.
Let’s take a closer look at how they differ below.
Registration Of Your SaaS Business
If you opt to register your SaaS business as a sole trader, then you’re in for a relatively simple process. To register as a sole trader, you just need to get an Australian Business Number (ABN) which can be applied for online. Once your application is approved, you’ll receive your ABN and you’ll be ready to operate as a sole trader.
Keep in mind, if you’re going to run your SaaS business with a name other than your personal name, then you will need to Register A Business Name.
If a company is more your cup of tea, the registration process is going to be a little longer and more complex. Every company needs to follow the regulations set out by the Australian Securities and Investment Commision (ASIC) as well as have certain things in place before they can be considered a company. Having a legal expert help Set Up Your Company can make sure it’s done the right way. If you’re registering the company with a business partner, then it’s important that all parties are on board and involved with the registration.
Who’s Liable For The Business?
As a sole trader, you’ll be completely liable for your SaaS business. The business is legally ‘attached’ to you therefore, whatever happens with the business falls on you personally. Generally, people who want to run their business themselves and consider their business to be low risk choose to operate as sole traders.
If your business is higher on the risk scale, then setting up a company might be the way to go. A company is a legal entity on its own. Therefore, the owners of the company have limited liability as the company can be responsible for legal matters, own property and have debts (however this does not mean company owners have zero liability or responsibility). If you’re in a partnership, then you’ll need legal documents like a Partnership Agreement to determine liability and responsibility of the company between partners.
What Does Maintenance Look Like?
Once you’ve set up as a sole trader, there isn’t much work or maintenance to do from there. You might pay certain licences or registrations on time but otherwise, a sole trader business is considered to be low maintenance.
If you’re running a company, then you’ll need to abide by ASIC regulations. This means, completing and submitting all required documents on time, paying company fees and ensuring all annual audits are completed. Running a company means there’s a number of tasks you’ll need to keep up with from time to time- if you’re curious to know more about running a company, we suggest a chat with one of our legal experts.
Legal Documents For My SaaS Business
When you combine intellectual property with sales, the line can get blurred and sometimes, things can be a bit tricky. However, this can be easily overcome with the right legal documents.
A few legal agreements you may want to look into getting for your SaaS business include:
SaaS Terms and Conditions: When you allow users to interact with your software, setting some ground rules can limit your liability, secure your revenue streams and overall, keep your SaaS business protected.
Software Licence Agreement: Licencing allows you to safely let others utilise your creation, without compromising your ownership. Having a Software licence agreement can make sure there’s no blurring between lines and important legal information is clearly communicated.
Copyright Licence: As your software is likely to be considered an original work, it can be available for copyright protection. Consulting with a lawyer regarding copyright options, such as getting a copyright licence, can help you secure further protection for your SaaS business.
Disclaimer: You may have noticed disclaimers on a lot of software purchases you’ve previously made. This is because, as a SaaS business, there’s only so much control you have over what happens with your product when it’s being used. A disclaimer can help keep your SaaS business’s liability in check.
Strong, well drafted legal documents can protect your business, your software and your customers, so it’s worth getting done by an expert.
What Else Do You Need To Build A Saas Business?
When you’ve registered your business and gotten the right legal agreements in place, then you’re almost ready to launch your SaaS business into the world. As a business owner, you’ll be assisting and interacting with customers. Therefore, it’s imperative you understand your duties under Australian Consumer Law (ACL).
Essentially, the ACL requires business to be:
- Refuse to engage in misleading or deceiving conduct
- Provide warranties, repairs and replacements where applicable
- Ensure consumers aren’t being taken advantage of
If you’re unsure about any of your obligations under the ACL, then it’s important to chat with a Consumer Law Expert. Getting caught violating the ACL’s rules can result in heavy penalties, plus your SaaS business’s reputation is likely to take a huge hit. It’s best to have the right information from the start and act accordingly.
Building a SaaS business is an exciting venture however, it’s important to take care of all the legal considerations so you can protect your business and software. To summarise what we’ve discussed:
- SaaS (Software as a Service) allows online access to software instead of individual installations
- SaaS businesses profit by offering software through subscriptions or one-time purchases
- Legal structure options for SaaS businesses: Sole trader, company, partnership
- Sole traders can register with an Australian Business Number (ABN)
- Companies must follow ASIC regulations and may require legal help during setup
- Liability: Sole traders are personally liable, companies have limited liability, partnerships require a Partnership Agreement to sort out matters like liability
- Sole trader businesses are relatively low maintenance, while companies must adhere to ASIC regulations
- Understanding Australian Consumer Law (ACL) obligations is crucial for SaaS business owners
- ACL requires businesses to be fair, transparent, avoid misleading conduct, provide warranties and protect consumers
- Violating ACL rules can lead to penalties and harm your business’s reputation
- Prioritise legal considerations to protect your SaaS business and software
If you would like a consultation on building a SaaS business, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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