Starting a new business can be an exciting but stressful time. Your to-do list grows faster than you can keep up with, and not surprisingly, the legal considerations may slip down that list or be forgotten. However, getting the right structures, contracts and policies in place from the outset could help you manage your relationships with key stakeholders, and reduce the risk of a dispute later on.
There will be different laws and regulations to consider depending on the nature of your business, including whether you are selling physical goods or providing services, if your customers are individuals or companies and if you plan on trading purely in the UK or further afield.
We’ve compiled a list of suggested considerations to help you get started:
|Decide what legal structure you are going to trade through (eg sole trader, partnership, limited company). If you are going to incorporate a company do this as soon as possible – you will need the company number in order to open a bank account, register with HMRC and sign-up with most suppliers.
|Will the business be owned by more than one of you? If so, you will probably need a shareholders’ agreement to set out how you will manage the business. It is also important to agree at this stage what happens in certain eventualities (for example, if one of you wishes to exit, or there is a dispute). Hopefully you will never need it, but it’s easier to agree before any falling out.
|What funding do you need? If an investor is going to provide some initial funding, do they want shares in the company, or will their investment be by way of loan only? Are the terms recorded in writing anywhere?
|Create standard terms and conditions or contracts which you will sell your products or services under, in order to mitigate your liability and protect cashflow. Review and understand your supplier contracts.
|Protect any copyright, trademarks, inventions or other intellectual property you create or use in your business, for example by seeking a registered trademark, or putting copyright notices on your works.
|Register with the Information Commissioner’s Office as a data controller, ensure you are using personal data in compliance with data protection laws, and produce a privacy notice explaining what personal data you handle and why.
|Becoming an employer
|Register as an employer with HMRC and provide a written statement of employment terms to employees when they start work.
|Health & Safety
|Ensure that there is a safe work environment and understand your health and safety responsibilities as an employer. Take out employer’s liability insurance.
|Understand your obligations to employees and what their rights and protections are. Employees have many rights when it comes to disciplinary action, being dismissed or being made redundant. They must also not be subject to illegal discrimination in the workplace and have the ability to raise grievances formally or informally.
|If you will exceed the required threshold, register for VAT with HMRC. Ensure your website, letterheads and invoices contain all information required by law including VAT registration number, company name, number and registered office.
|Consider how you will manage your cashflow. For example, will you require whole or partial payment from customers up front, set credit limits and/or credit check customers before you trade with them? Ensure you have payment reminder systems and debt collection procedures in place.
|Will you buy or lease premises? Does the lease contain a break right to enable you to leave the premises early if things don’t work out? Consider whether you need any professional surveys given the nature and state of the property, e.g. structural or asbestos.
If you would like to discuss any of the above, or any other legal aspect to starting your own business, our expert lawyers in a breadth of services including corporate, commercial, employment, tax and real estate can help.
We’re here to join you on your ambitious journey – get in touch.