Scaling Businesses Safely: Five Legal Risks that come with growth and what you can do to stay ahead of it

Why does growth bring new legal risks?

Growth in business is exciting.  It is the payoff for years of hard work and smart decisions.  But growth doesn’t just bring new opportunities.  It reshapes the risks you face.  Often the biggest risks are not the obvious ones.  They are the ones hiding in contracts, people decisions, and old structures that no longer fit.

When businesses scale and grow, legal risk tends to surface in unexpected ways: hiring too fast, signing deals that no longer reflect how you operate, or relying on handshake agreements that collapse when real money or conflict is on the line.  If these aren’t addressed early, they can quietly turn into disputes, liabilities or missed opportunities.

Here are five areas where legal risk often hides during growth and what you can do to stay ahead of it.

1. Contracts that don’t keep up with you

Most businesses start with simple contracts.  They are quick, practical and often pulled from a template.  But as your business grows, those early agreements can become a problem.

Maybe your client terms don’t protect you for the new services you are offering, or your supplier contract doesn’t reflect your businesses needs anymore.  Or maybe your employment contracts are missing key protections.

These gaps don’t always cause issues right away.  But when something goes wrong, or when you are preparing for a sale, they matter.

How to stay ahead: Review your key contracts regularly.  If your business has changed, your agreements should too.  Look for terms that no longer reflect how you operate, and make sure your protections are clear and enforceable.

2. Employment Risks that multiply with every hire

Hiring employees is often the first sign of growth.  But fast hiring can create legal exposure, especially if roles are loosely defined or onboarding is inconsistent.

Common issues include:

• Contractors who are legally employees;
• Casuals who should be permanent employees;
• Employment contracts that do not protect you; or
• Remote workers without proper WHS protocols.

As your team grows, so do the risks of underpayment claims, unfair dismissal disputes and cultural friction.  If your employment documents have not been reviewed for a while, they might not protect you when it counts.

How to stay ahead: Audit your employment arrangements.  Make sure contracts are tailored to the role.

3. Ownership and decision making gaps that surface under pressure

Many businesses start with informal arrangements.  Decisions are made quickly, roles overlay and trust fills the gaps.  But as your business grows, that informality can become a liability.

You might have:

• Equal shareholders who contribute unequally;
• No clear rules for who makes which decisions; or
• No plans for what happens if someone wants to leave, or if they simply stop contributing.

These issues often surface during stress points, raising funding, negotiating a sale or disagreeing on the business’s future.  Without clear agreements, growth can stall, disputes arise or the business you have worked so hard to build needs to be closed.

How to stay ahead: Put a shareholder or partnership agreement in place, or update the one you already have.  Make sure it sets out clear decision making rules, defines roles, and crates a clean exit strategy if someone leaves.

4. Leases that box you in

Commercial leases are often signed early, with little thought to long term flexibility.  But as your business grows, those terms can become restrictive or expensive.

Watch out for:

• Difficulty with assigning or subleasing;
• Make good clauses that cost more than expected; and
• Relocation rights that let landlords move you mid-term.

If your premises are part of your brand, lease terms matter more than you think.

How to stay ahead: Review your lease before any growth milestone, especially if you are planning to sell, expand or relocate.  Negotiate flexibility where possible and understand your obligations clearly.

5. Asset protection that no longer fits

Many business owners set up asset protection early.  But as the business grows, those protections can weaken if they are not reviewed.

You might be signing personal guarantees without realising the exposure.  You might still be operating as a sole trader, which means your personal assets are exposed all the time.

How to stay ahead: Revisit your asset protection strategy.  Make sure your structures are still fit for purpose and that your personal exposure is minimised.

Final Thoughts: Growth with clarity, not risk

Growth is good – but growth without legal clarity can be very risky and costly.

These issues don’t always appear in day to day operations.  They tend to surface when something goes wrong, or when something big is on the horizon, like a sale, restructure or dispute.  By then, fixing them is often far more complex, disruptive and expensive.

The good news is every one of these risks is manageable.  With the right advice you can tighten your contracts, protect your team, set up clear ownership structures and safeguard your assets.

Legal clarity is not about slowing down.  It’s about freeing you to keep growing with confidence, without looking over your shoulder.

Our team can help you assess your growing needs and ensure that you are protected as your business expands.

Call us on 4951 8199 or email for personalised solutions for your business.

 

The material included in this website is produced by O’Hearn Lawyers Pty Limited.  It is designed and intended for general information purposes only.  The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.  You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.