In today’s world there seems nowhere that the term Artificial Intelligence (AI) has not permeated through society. Small business like the rest of society is learning to adapt, control and implement AI.

Figures from the Australian Bureau of Statistics (ABS) as of 30 June 2025 indicate there were 2,729,648 actively trading businesses in the Australian economy, with 994,178 of these businesses employing people which they classify as small business.

What exactly is a small business?

There are a range of definitions as to what constitutes a small business but the three definitions, I relay to clients are from the:

• ABS which is a business with fewer than 20 employees
• Australian Taxation Office (ATO) which is a business with an aggregated turnover of less than $10 million; and
• Australian Securities and Investments Commission (ASIC) which is a business with annual consolidated revenue of less than $50 million, consolidated gross assets of less than $25 million, and fewer than 100 employees.

Many of our clients will fall into those parameters and when we talk about small business, we generally consider those businesses of up to 100 employees or gross turnover of up to $50 million as Small Businesses, and although they do not strictly fit the ABS definition, I believe they are from a practical perspective a small business.

How can AI help small business?

There is no doubt that AI can assist small business in a range of areas including:

• Automation of Tasks
• Customer experience and interactions
• Cybersecurity
• Forecasting and decision making
• Human resources and recruitment
• Inventory and stock control
• Marketing
• Payroll
• Productivity

It is clear that AI is no longer the domain of tech giants and big corporations, with small businesses actively embracing it.

It was recently stated that small businesses are adopting it at ‘warp speed’.

With that level of enthusiasm many owners and directors often forget that with incredible innovation comes great responsibility.

The legal implications for a small businesses and AI

The legal implications for any small business when it comes to the use of AI is endless and we advise clients at the forefront of their mind should be the planning as it is as important as implementation to avoid unintended consequences.

Every small business should consider the following issues, which is by no means an exhaustive list:

• Bias and discrimination when hiring and dealing with customers and clients
• Contract risks when using it and the lack of liability for its use
• Consumer law when using it to provide information to customers and clients
• Data protection of private information
• Ethical guidelines from an industry perspective
• Intellectual property protection
• Regulatory compliance across a range of legislation

As can be seen from this list, AI can and will affect most aspects of any small business operations and for that reason a robust governance and accountability framework to oversight AI systems should be implemented.

That frameworks should include regular legal and ethical assessment surrounding the risks of any AI systems.

Additionally, we are requested to assist clients with:

• Data compliance, when handling sensitive or personal information
• Maintenance of documentation and records relating to system design, deployment and testing
• The monitoring of legislative changes and advising of compliance related issues
• Training of staff relating to consumer, discrimination and privacy laws

Remember AI is a tool, and nothing can replace human oversight to ensure compliance and lawful and ethical decision making.

How can FC Lawyers help?

At FC Lawyers our experienced business and corporate team have assisted range of businesses across different sectors in implementing their strategies on how to deal with AI and setting up frameworks, guidelines and regulatory compliance regimes.

Contact our team today to discuss your legal needs.