Getting a prototype is an important step when designing something new. A prototype business specialises in providing that service to businesses and designers everywhere in order for them to continue improving on their inventions. 

In this article, we’ll look at what a prototype business is and how to go about setting one up. We’ll cover the basics of getting a business running, navigating the online business world, important laws to be aware of and agreements to have in place. 

Keep reading to learn more. 

What Is Prototyping?

When a business comes up with an idea, they often need the help of another to bring it to life so they can test out their design. This ‘test design’ is known as a prototype. 

Prototypes can come in many different versions, such as a 3D print, a video, sketch, model or virtual reality. 

Example 
A tupperware company creates a design for a glass container that should help preserve the freshness of food for longer. After coming up with the design, they require a prototype to test it and work out any kinks in their product. 

After submitting their design idea to a prototype business, they receive a model of their design and work from there. 

What Is A Prototype In Business?

A prototype business provides a service to businesses (or anyone) of bringing the prototype of their design to life. A prototype business may offer a broad variety of services or choose to specialise in a select few. 

For example, a prototype business that exclusively offers to bring designs to life through a 3D print. 

How To Start A Prototyping Business

Starting a prototyping business requires thoughtful planning (for example, through a business plan). 

Like any other business, it also needs to go through the registration process for tax purposes and other fees. 

Business Plan For Your Prototyping Business

Any sort of business plan is recommended for budding entrepreneurs. Having the details, goals and research relating to your business written down in one accessible document  is a great way to stay on track and organised. 

It helps set out your goals and your strategies for achieving these goals, as well as important deadlines to ensure your business is performing the way you like. 

Choose A Business Structure For A Prototyping Business

Another thing to consider is the business structure of your venture. Commonly, businesses function as a sole trader or a company. 

The requirements for both are different – a sole trader is an individual operating the business on their own whereas a company is a legal entity needing a structure and personnel such as directors and secretaries (depending on the type of company). 

The business structure you choose will depend heavily on your future goals and current circumstances. For example, if you want to keep things inexpensive and simple, a sole trader is best for you. If your business intends to grow and expand internationally, a company structure will help protect your business for higher-risk engagements. 

Register Your Prototyping Business Or Company 

The next step is to register your business or company with the Australian Securities and Investments Commission (ASIC). If you’re registering a business, you will need an Australian Business Number (ABN), however, if you’re registering a company then you also need to make an application for an Australian Company Number (ACN). 

Open A Bank Account For Your Prototyping Business

It’s also essential to open up a separate bank account for your business. Using your personal bank account for business transactions is not advisable and it can get unnecessarily complicated, so it’s best to keep everything separate. 

Apply For Licences Or Permits

Next, you will need to apply for any licences or permits. Currently, there’s no specific licence required for a general proptype business. 

However, if your business is industry specific (i.e. medicine or beauty products), then you may wish to look into attaining any special licences.  

Starting An Online Prototyping Business

The online world is a thriving, functioning marketplace for many businesses. However, it’s important to be aware of how to properly navigate this platform, as failing to secure the right legal documents can lead to problems that could have been initially avoided.

Online Agreements 

Getting the right online agreements in place is key to running a well protected business online. 

The key online agreements you want to look to getting are the following: 

  • Website Terms and Conditions– this determines the rules for customers to use your website and limits your liability if anything goes wrong
  • Privacy Policy– when collecting the personal information of consumers, a privacy policy is legally required to let them know what’s happening with their information (more on this later)  
  • Cookie Policy– a cookie policy asks the permission of customers to track their activity. It’s transparent and lets them know you’re operating an honest and open website. 

At Sprintlaw, we can help get all of these policies up on your business website – contact us to find out more. 

How Do I Protect My Intellectual Property?

Intellectual property plays a key role in the marketing and brand awareness of businesses, therefore, protecting IP is a crucial part of ensuring your business can avoid future trouble. 

More specifically, protecting your intellectual property helps you retain your competitive edge by ensuring no one else has access or can use what you’ve built for your business’ brand. 

Copyright

Copyright is automatically applied on any original work created by a person. According to the Copyright Act 1968, when you own the copyright to a material (such as a book, music composition, video or artwork), then you possess the ability to licence the same materials for economic profit. 

If copyright has been infringed by someone using your work without your permission, then you have the right to make a complaint. If your businesses possess the copyright to something then it’s important to know your rights. 

On the other hand, if you are using the materials of another, it’s important to have explicit permission to do this first. 

Trade Marks

Trade marks can be registered for anything that is specific or unique to your business’ personal brand. It can be a logo, sound, image, smell, phrase and, in some cases, certain colours have been trade marked! 

If you have a form of IP that is crucial to your business’ identity in the market, it’s important to get it registered with IP Australia

Patents 

A patent is an exclusive right that you can register for a device substance process or method. In order to successfully register a patent it must be new, useful, innovative or inventive. 

In a prototype business, you may be dealing with patents a lot as your customers might have one or potentially have one. Generally, you won’t have to get the patents registered for your customers, but you may wish to inform them if a prototype they have come up with is patentable.   

Further, if you have patents of your own that you may use as examples, then you may want to look into getting them registered with IP Australia to prevent others from copying it (if another registered it before you they can prevent you from using it). 

What Laws Apply To My Prototyping Business?

It’s important to be aware of the main regulations that are likely to impact your businesses so you can be aware of them and act in compliance. You want to run a legal business, not one that is breaking regulations! 

Privacy Act 1988

As mentioned before, privacy plays a key role in the online policies your businesses will have, namely a Privacy Policy. According to the Privacy Act 1988 and the Australian Privacy Principles (APP) a business that has an annual turnover of more than $3 million needs to have a Privacy Policy in place. 

However, this was expanded to include all businesses that collect any sort of personal information from their customers. 

Therefore, if you are collecting the names, addresses, bank details and any other personal information (anything that can be used to identify them), then you need a Privacy Policy in place. 

A good Privacy Policy lets consumers know what information is being collected, how the information is being used and the methods used to store it.  

What Is The Corporations Act 2001?

If you are registering a business, you will be required to adhere to the Corporations Act 2001. The legislation covers the ways in which every company should operate including: 

  • Annual reviews
  • Company structure
  • Directors duties
  • How shares and shareholder rights should be managed
  • Who can sign for the company 
  • Liabilities

The Actcan be a complex and overwhelming piece of legislation, so if you need help understanding your rights and obligations under it, contact us today! 

What Is The Australian Consumer Law?

The Australian Consumer Law (ACL) dictates the rights of consumers when they engage in the economic market. As a business provider, your clients are the consumers who are largely protected by the ACL. 

Therefore, it’s your legal obligation to make sure their consumer rights have been met according to the rules of the ACL. This includes:

  • Ensuring they have not been deceived or misled in any way
  • Warranties and liabilities have been addressed 
  • The product they have paid for is what was promised
  • There are no hidden fees or surprise costs 

A consumer has the right to make a complaint if they feel their rights have been violated under the ACL – it’s important to be in strict compliance as it could also impact the reputation of your business. 

What Agreements Do I Need For My Prototyping Business?

A business is as strong as its legal agreements. We’ve listed some of the key contracts you’ll need to consider getting in place for your prototyping business.

Should I Have NDA’s And Confidentiality Clauses?

As clients are coming to you with a design that is likely to be important to them, it’s a wise move to guarantee their privacy. Non-Disclosure Agreements (NDAs) or Confidentiality Clauses in contracts with clients can ease their mind about any worries about their designs being revealed to a third party who does not have permission. 

These clauses essentially prevent any unauthorised parties from accessing or using certain information specified in the contract. 

Furthermore, you may wish to consider confidentiality clauses in the contractual clauses of any employees so they can be held to the same standard of secrecy. 

Employment Agreements For Prototyping Businesses

If you are looking to hire help to run your prototyping business, then you’ll also be needing Employment Agreements. A contract between you and your employees will detail your rights, duties, work hours, pay, leave, entitlements, termination and anything else that is relevant. 

It’s important to have this in writing to avoid potential misunderstandings or legal issues in the future. 

Contractor Agreements In Prototyping Businesses

Like employment agreements, if you are hiring help externally for a more short term basis or a specific project, then Contractor Agreements are also necessary. 

Contractor Agreements are especially important as they are needed to distinguish the employee in question is external (and their rights and obligations should reflect this) or else you may end up owing contractors the same duties owed to internal employees.  

So, it’s important to know the difference between employees and contractors to ensure you are fulfilling your obligations to them under Australian employment law

Supply Agreement 

If your business needs materials or specific resources to operate, then it’s likely you’ll have a supplier. 

Having an agreement with your supplier legally binds important matters such as payment, liability, delivery date, times, and the product being supplied into a contract so both parties are on the same page. 

Our lawyers can help you draft a Supply Agreement that covers key ground in your specific business arrangement. 

Key Takeaways

There’s a lot that goes into starting a prototyping business! However, don’t be overwhelmed. 

When you take it each step at a time and have the right legal help, the process doesn’t need to be so daunting. To summarise what we have discussed: 

  • A prototyping business is where the business brings to life a design or idea by their clients 
  • Registering a prototyping businesses is the same as an other, you will need an ABN, bank account and an ACN if you’re setting up a company  
  • Getting the right agreements in place is necessary such as Employment Contracts or Supply Agreements 
  • To navigate the online business world, make sure you have your Cookie Policies and Privacy Policies in place as well as strong Terms and Conditions
  • Adhere to the relevant privacy, consumer and business regulations 

If you would like a consultation on starting a prototyping business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

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