Five Legal Mistakes to Avoid When Starting a Sports Business

Starting a business in the sports industry—whether as an athlete, agent, or entrepreneur—comes with unique challenges. While it’s easy to focus on branding, partnerships, and generating revenue, overlooking key legal considerations can lead to costly problems down the track.

Many businesses start with limited capital, which makes it tempting to cut corners on legal structuring. But these early mistakes often cost 10-50x more to fix later—assuming they can be fixed at all.

Here are five of the most common legal mistakes made when launching a sports business, and why they matter.

1. Verbal Agreements Instead of Written Contracts

Many sports businesses start informally, with founders making verbal promises about equity, responsibilities, or IP ownership. This often happens when bringing on early team members, contractors, or advisors without a formal agreement in place.

The two biggest risks of verbal agreements are:

• Equity Being Given Away Too Soon – If someone is promised shares upfront without clear performance milestones, they may be entitled to retain equity even if they don’t contribute as expected. Once equity is issued, it can be difficult to claw back, meaning the business may be stuck with shareholders who add little value.

  
  

• Intellectual Property (IP) Ownership Issues – Under Australian law, IP created by a contractor stays with the contractor unless assigned in writing. If a business engages a contractor to develop branding, content, or software without an IP assignment, they may not own the rights to crucial assets.

  
  

The Fix: Always use written contracts that clearly define roles, equity structures, and IP ownership.

2. No Shareholders Agreement

A shareholders agreement sets out the rights, responsibilities, and expectations of each shareholder. Without it, disputes can quickly arise, especially when there is no clarity on:

• Decision-making power (Who makes the decisions and when?);

  
  

• Equity conditions (What happens if a shareholder stops contributing or fails to comply with their obligations?);

  
  

• Exit and Entry plans (How can a shareholder sell their shares, and how does a new shareholder get introduced?).

  
  

Without a shareholders agreement, underperforming shareholders may still retain equity with no recourse, creating long-term problems. The earlier this agreement is in place, the easier it is to prevent disputes.

The Fix: A tailored shareholders agreement that sets clear rules for ownership, decision-making, and entries and exits.

3. The Wrong Business Structure

Many businesses start with shares held in personal names, without considering tax implications or asset protection. This can lead to:

• Unnecessary tax liabilities when transferring shares to a trust or company later; and

  
  

• Increased personal risk, particularly for at-risk individuals (such as directors) holding shares in their own names.

  
  

From an asset protection perspective, it’s often advisable to separate business ownership from personal assets. Having shares in a properly structured entity—such as a trust or holding company—can help reduce tax burdens and limit personal liability.

The Fix: Get legal and accounting advice early to structure the business correctly from the outset.

4. Not Protecting Intellectual Property (IP) from the Start

A sports business’s most valuable assets often include its brand, content, and technology. Yet, many businesses fail to properly secure these assets early on.

Common mistakes include:

• Failing to register trade marks – Without a registered trade mark, another party could claim rights over your brand name or logo; and

  
  

• Not assigning IP to the company – Founders may assume IP automatically belongs to the business, but unless formally assigned, ownership remains with the contractor.

  
  

The Fix: Ensure IP is legally assigned to the company and register trade marks early to protect brand assets.

5. Misclassifying Workers as Contractors Instead of Employees

Many businesses try to reduce costs by engaging workers as independent contractors rather than employees. However, if a worker is later deemed to be an employee, the business may be liable for:

• Unpaid superannuation;

  
  

• Leave entitlements; and

  
  

• Payroll tax obligations.

  
  

This is particularly relevant in the sports industry, where coaches, trainers, and support staff are often engaged under different arrangements. If a worker is treated like an employee (e.g., working regular hours under company control), they may legally be entitled to employee benefits—regardless of their contract terms.

The Fix: Ensure that worker agreements reflect the actual working relationship and comply with Australian employment laws.

Why These Issues Matter

Many businesses operate with limited capital in the early stages, making it tempting to skip legal structuring. However, fixing these mistakes later can be significantly more expensive than preventing them upfront.

By taking the right steps early—securing contracts, structuring correctly, and protecting IP—businesses can avoid costly disputes, tax issues, and legal headaches down the track.

Thinking of launching a sports business? Get in touch to ensure you’re set up for long-term success.

Matt Krog

Director