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Since travel restrictions have eased, people are taking advantage of the opportunity to get out there. Moreover, there’s a growing preference for experiences over material things. As experience gains more value, a lot of travellers will be able to attest that accommodation can really alleviate the travel experience.
So, if you’re thinking of starting your own hotel business in 2024 then you might be onto something promising. However, starting a hotel business is no easy feat. There’s a lot of careful planning and dedication that goes into it.
A lot of that planning will revolve around the legal considerations of starting a hotel business. However, this doesn’t have to be something terrifying! With the right legal expertise by your side, starting your own hotel business in 2024 can be as stress free as ordering room service.
How Do I Start My Own Hotel Business?
If you’ve been reading our articles, then you’ve likely learned by now that every business needs to be registered before any kind of trading can happen. A hotel is no different- no business operations can take place until your business is officially registered.
So, how do I go about registering my hotel business?
There’s a few things that need to be established before you register your business. The registration for your hotel business will depend on the kind of legal structure your hotel is going to have. Sole trader businesses are able to get their registration sorted online and the same day in most cases, while registering a company is far more complex. Additionally, if you’re thinking of starting your hotel business with a partner, then you’ll need to have the right legal documents in place to properly cement the rules of your partnership.
Each legal structure has its pros and cons, so it will be up to you to decide the right one for your business.
Establishing the Right Legal Structure For Your Hotel Business
Deciding on a legal structure for your hotel business means understanding what each legal structure is and what they bring to the table.
Let’s take a deeper dive into them below.
Sole trader
A sole trader business is where the business owner alone is responsible for the whole operation. A sole trader cannot be in a partnership and they claim full, personal liability for the business. Even though a sole trader business is easy to set up and maintain, it may not be the best option for running something that has a higher potential of risks.
Company
A company is a legal entity on its own. Much like a legal person, the company is able to own property, earn profits, incur debts, be responsible for liabilities and have legal matters to its name. Due to the company’s status as a legal entity, owners of the company have limited liability. This is always a great benefit, however registering a company requires a lot more patience and planning. Companies have strict rules and regulations, it’s important to follow them during set up and ensure you’re keeping up with any ongoing obligations, such as annual audits and reports. A legal expert can help you successfully navigate setting up a company.
Partnership
Going into business with a partner is always exciting, however it is crucial to take the additional measures of having the right legal instruments in place that can help secure your partnership. It’s important to have a written and signed record of what each partner’s responsibilities are, how profits will be divided, how disputes will be resolved and what happens if one person wants to leave the partnership. Legal documents like a Partnership Agreement or a Founders Term Sheet can help establish everything you need from the start.
Develop A Comprehensive Business Plan For Your Hotel
Now that you know about a few different legal structures, how do you know which ones are best for your hotel business? There’s no single answer to this question, as each business is different. Even though most hotels are registered as a company, their structure as a company can differ- for example, some hotels might operate with a Dual Company Structure.
As the budding owner of a hotel business, you will need to develop a comprehensive business plan and go from there. A Business Plan contains essential analysis and forethought about your business, such as market research, legal matters, finances and business goals. When you have a plan in place, you’ll be in a better position to decide on the right kind of legal structure for your hotel business.
When you’re busy planning and sorting through all that information, it can be easy to go off course. That’s why, it helps to get the advice of a business legal expert when you’re starting your hotel business. They’ll be sure to steer you in the right direction.
How Much Does It Cost To Start A Hotel?
There’s no ballpark number we can give for starting a hotel business, as the cost can vary on a number of different factors. However, no matter how big or small you predict your hotel business’s costs to be, it’s imperative you sort out the necessary funding for your venture and secure the right legal protections for it.
One of the most important aspects of any business is the financial matters. Getting it right can make or break your business. Having the right legal help along the way can make a huge difference.
Securing the Necessary Funding For Your Hotel Business
You can secure funding for your hotel business in multiple different ways. Perhaps you’ll be using your own money, taking out loans or looking to raise capital. No matter which path you decide to take, it’s important to have all the necessary legal protection along the way.
For instance, if you’re thinking of raising capital by getting investors on board, then you will need to talk to a legal expert on Capital Raising. Getting money for your business isn’t as simple as exchanging a check for shares, it requires designing an investment structure and negotiating legal terms. A legal expert can guide you through this process.
Understanding the Regulatory Requirements for Starting a Hotel Business In Australia
So, you’ve ticked off planning, registration and securing funding for your hotel business. What next? You’re a lot closer to actually getting your hotel business off the ground and running, so now you need to think about the legal regulations you’ll need to look out for when managing your hotel.
As a hotel, the main legislative requirements that will impact your hotel business are going to be related to food, consumer laws and competition. It’s wise to familiarise yourself with:
- Food Standards Codes
- Australian Consumer Law
- Competition and Consumer Act
These are some pretty hefty and complicated areas of law, so chatting to a Consumer Law Specialist or a Regulatory Compliance Lawyer can help answer all of your questions.
What Legal Agreements Do I Need For A Hotel Business?
When you’re busy running your hotel, legal agreements are what keeps it secured. A good legal agreement can help keep things going and save you from potential troubles. We recommend getting them drafted by a legal expert to make sure they’re working in your hotel business’s favour.
A few legal agreements you might require for your hotel business include:
Business Terms and Conditions: As a hotel, you’ll want to maintain a calm and peaceful environment for everyone that enters it. Therefore, having a few rules in place might be necessary. A business terms and conditions lets everyone that interacts with your business know what’s acceptable and expected of them.
Supply Agreement: Every hotel business needs to be stocked with supplies and ready to serve guests. To keep your shelves full, you may be required to have a supplier that routinely brings in what you need. Having a contract in place with your supplier is a good way to secure matters like payment, delivery, dispute resolution and termination.
Privacy Policy: Most hotels have online bookings. If this is your hotel as well, then you’re legally required to have a privacy policy in place as you’ll likely be collecting the private information of your guests to make their booking.
Employment Agreement: Staff are necessary to keep a hotel running efficiently. It’s important to be clear with staff on all roles and responsibilities, so everyone is on the same page.
Hiring And Training The Right Staff For Your Hotel Business
As we mentioned, staff are necessary to keep a hotel business running smoothly. When you hire staff to bring them on board, there’s a good chance there will be a learning phase. This part is crucially important because it’s where you will show your staff the different rules, roles and responsibilities of your hotel business. Doing this successfully can result in a confident, positive team which makes for a hospitable environment for you hotel guests- which is always good for business.
Along with proper training, a Staff Handbook can give your employees the information they need to stay on track, answer questions for them and be a helpful guide. We recommend getting one expertly drafted by a legal professional, so it contains everything necessary and more.
Additionally, as an employer, it will be your responsibility to foster a safe workplace that doesn’t cause your employees mental, physical or emotional harm. This means, establishing strict rules and codes of practices for the wellbeing of all your employees. One way to ensure protection for all your employees, is to have a Workplace Policy customised to your hotel business’s needs. A workplace policy should take into consideration any minimum standards and Australian workplace safety regulations. Having a legal professional draft one is the best way to ensure it ticks all the right boxes.
What About Buying A Hotel Franchise?
Instead of building a hotel from scratch, you can always buy into a franchise. Essentially, when you buy a franchise of a business, you purchase the right to open the same business, in a different location. Generally, a franchisee (the one buying the business) will need to pay the franchisor (the original owner of the business) a monthly fee in exchange for the right to do so.
Franchises are regulated by the Franchising Code of Conduct and it has some pretty strict requirements to prevent consumers from being taken advantage of. For example, all franchisors must upload their disclosure statement online and provide every potential franchisee with a standard information statement. When you’re thinking of buying a franchise, it’s important to do your research and make sure you’re aware of your rights, as this is an investment you don’t want going wrong.
Then, you’ll need to negotiate the terms of your franchise. Talking to a legal expert in franchising and having them draft the Franchise Agreement is the right way to go, as they are aware of what needs to be covered and the best way to protect you.
If you’re looking to start your hotel business by purchasing a franchise, get in touch with a Franchise Lawyer today.
Next Steps
Starting a hotel business requires meticulous planning and well thought out strategies. With the right legal help, this entire process could be made much easier. To summarise what we’ve discussed:
- Registering your hotel business is essential, and the type of legal structure (sole trader, company, partnership) will determine the registration process
- Each legal structure has its pros and cons, and choosing the right one depends on your business’s specific needs
- Developing a comprehensive business plan is crucial, including market research, legal matters, finances, and business goals
- Seek advice from a business legal expert to make informed decisions
- The cost of starting a hotel business varies, and securing funding and legal protections is essential
- Funding can be obtained through personal funds, loans or raising capital which requires legal expertise for structuring investments
- Understanding regulatory requirements related to food standards, consumer laws and competition is vital for managing a hotel business
- Legal agreements such as Business Terms and Conditions, Supply Agreement, Privacy Policy, and Employment Agreement are necessary for a hotel business
- Hiring and training the right staff is crucial for a successful hotel business, along with creating a safe workplace environment
- Consider buying a hotel franchise instead of starting from scratch, which involves compliance with the Franchising Code of Conduct and negotiation of a Franchise Agreement
- It’s important to seek legal advice when considering purchasing a franchise
If you would like a consultation on starting a hotel business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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