Key Legal Issues for a Start-up Business

Launching a new business is an exciting time. But it is not a straightforward process and it is important to deal with core legal issues early to ensure your business operates efficiently, and to also ensure that, when the time comes to scale up, your business is ready and is in good shape to expand.

If you are thinking about starting your own business, here are some of the legal requirements to consider:

1. The legal structure of your business:

Before you start trading, you will need to decide what kind of legal structure you want your company to have. Your chosen legal structure will impact on the amount of tax you pay; the amount of control you have over your business; the amount of paperwork you will need to deal with; any profit your business makes; and your responsibilities if the business makes a loss.

Most businesses are set up as one of the following:

  • Sole trader – straightforward without much fuss, but you are personally responsible for any debts of your business;
  • Limited company – the finances are separate from the Shareholders’ personal finances; however, you do need to deal with reporting obligations and management responsibilities; or
  • Partnership – this is some way between a sole trader and a limited company. Any two or more persons can start a partnership to run a business together. However, you share responsibility for the debts of the business (a limited liability partnership can limit the liabilities, so is often an attractive structure with the partnerships umbrella. However, this structure is not without its responsibilities.

Choosing a legal structure will be dependent on the type of business you have (or plan to have) and there are advantages and disadvantages with any of the structures above. To switch the structure later down the line can cause complications and increased costs to resolve.

Therefore, make sure you spend time at the beginning of your business’ journey assessing what type of structure is best for you and liaise with your accountant throughout this process.

2. Intellectual Property

From the very beginning you should ensure that you try to protect your brand.

Intellectual property is something that you create using your mind and, within this umbrella, includes: names of products or brands; inventions; the design or look of an item; and written or artistic works. There are a range of protection that cover specific intellectual property rights.

Taking the name of your new company as an example of intellectual property, you will need to undertake your research before selecting the name (and potentially a logo) for your business. You need to ensure you have chosen something unique, which is not going to infringe upon another company’s trademark. Once you have selected your official company name, you should consider registering the name and logo (if you have created one) as a trademark.

When you register your trademark, it allows you to take legal action against anyone who uses your brand without permission and can therefore stop any counterfeits benefitting from the future reputation of your brand.

Many well-known companies have also registered a colour trademark. For example, Tiffany & Co’s duck egg blue is instantly recognisable as relating to Tiffany’s. It is not as simple as choosing a colour and registering it however, as there are many factors that decide whether the trademark application succeeds. Nevertheless , the visual impact of a colour can have a lasting impact and hence why protecting as much of your brand as possible will assist you in the future.

3. Licenses

A business licence is an official permit provided by a government, or equivalent, agency that allows the business to undertake its activities. The licences required varies depending on what industry your business falls within. It is vital that you speak with your local council to assess what licences (if any) you will be required to have.

A premises licence is a common one and will be required to have if you are thinking about selling alcohol in England and Wales.

If you plan to play music in your establishment, you will also need to get a licence to play any kind of music. Playing music happens across a number of sectors including in shops, restaurants, hairdressers, churches etc and is, therefore, wide ranging.

4. Relevant health and safety laws

As a business owner, you will have to assume several important health and safety responsibilities. This doesn’t have to be complicated, costly or time-consuming. For many businesses, you just need to complete a series of practical tasks that will safeguard people from harm and protect the future success and growth of your business. The approach you take should be proportionate to the size of your business and the nature of your business activity. For most small, low-risk businesses, the steps you need to take are straightforward.

5. Insurance

Insurance can protect you and your business against risks including accidents, sickness, theft, and legal fees. The cover you need will depend on the nature of the business and how you run it.

Aside from an employer’s liability insurance, you may want to consider investing in public liability or professional indemnity as well. These types of coverage will help protect your business from compensation claims if something goes awry.

6. Selling online

Online selling domestically – you need to ensure that you comply with distance selling rules

7. Legal documentation

The legal documentation to have in place is too vast to list here for all the facets of business, however, some important documentation to ensure is drafted for your business are as follows:

  • Limited company – ensure you have a shareholders’ agreement in place to deal with the obligations between the parties and your articles of association are fit for purpose for your company
  • Partnership – ensure you have a partnership agreement in place to regulate the position between the partners
  • Confidentiality or non-disclosure agreements – these are particularly relevant if you will be obtaining bank financing or to initiate supplier contracts. They can help protect your brand
  • Data protection policy – there are many obligations placed on a business in respect of the protection of data. Please ensure you familiarise yourself with the rules or take legal advice to ensure you are adhering to the latest law.

8. Insurance

Insurance cover for a business is vital to protect against everyday risks that face a business including mistakes, damage to assets and also legal costs. There are various types of insurance available and you will need to check which ones would benefit your business, however, some insurance is compulsory, including: employers’ liability insurance; or, if an employer, commercial motor insurance (if using vehicles for your business); and, in some professions (including the law), professional indemnity insurance,. Other insurance policies are optional.

Owning and operating a business can be an incredible growth opportunity – personally, professionally, and financially but it is important to seek legal advice and assistance in the planning stages. Our team of experienced and friendly professionals are here to help. For more information, contact 01603 677077.