Open for Business! This phrase has a nice ring to it…doesn’t it? Seeing your business idea become a reality is an exciting prospect, but for many start-ups, due to concerns of incurring additional costs, seeking legal advice to protect your new business can quickly fall to the bottom of the ‘to do list’.
When starting a new business it is important to seek advice at the earliest opportunity to discuss the best possible structure, as well as what documents you require to make sure you protect your business from the outset. Seeking advice early on can save significant costs in the future, if such protections are not in place.
Here are some tips for start-ups to save possible headache further down the line.
Will you set up as a partnership, limited company or sole trader?
One of the first things to decide is what structure your business will take. Different business structures carry different risks which can be avoided by seeking legal and accountancy advice at the outset.
Typically, setting up as a limited liability company is the most favoured structure for new businesses, largely due to the increased protection of personal assets. However, whilst setting up as a limited company may be the most common structure, it may not be right for your particular set of circumstances.
Shareholders Agreements / Partnership Agreement
Are you going at it alone or will a group of you be involved in the running of the business?
If two or more are involved in the ownership and running of the business then it is important that you have a Shareholders Agreement or Partnership Agreement in place. Without this, you may be reliant on the provisions of the Companies Act or Partnership Act, which may not deal with matters as you’d expect.
Such agreements will form a legal relationship between the shareholders or partners and can cover all aspects of the running and management of the business. This can include how business decisions will be made, what happens if one of you wants to leave or is no longer capable of working in the business, the sharing of profits, and dealing with disputes or how the business should be valued in the event of exit.
Terms & Conditions
With terms and conditions widely available online, it can be tempting to simply download a set for free. However, this can often cause issues further down the line and can result in considerable costs being incurred in resolving any problems.
The way in which your terms and conditions are drafted can have a significant impact on the everyday business that you undertake. Every business is different and it is therefore important that your business has a bespoke set of terms and conditions, dealing with how your business will deal with its suppliers and customers. By utilising terms and conditions that have been prepared for another business, you may well be missing out on certain opportunities or protection that a bespoke set can provide.
Get the name right first time!
Your business name may turn out to be one of the company’s most valuable assets. When setting up your business, it is important to check whether your proposed business name is the same as (or similar to) an already established business. Having the same (or similar) name as an established business may cause issues down the line, such as being forced to change your business name once you’ve already invested significantly in branding and profile raising.
Also known as a non-disclosure agreement (NDA), a confidentiality agreement is essential in protecting any information which may be commercially sensitive.
Before disclosing any confidential information to any suppliers, customers, agents etc, it is important to make sure that they sign up to a confidentiality agreement whereby they agree to keep confidential any confidential information relating to your business.
The more success the business has, the busier you’re going to be and the more likely it is that you’re going to need to hire some help. That may be the use of self-employed consultants or you may choose to take on your own employees. Whatever the case, the law surrounding employment is one of the most complex and frequently changing area of legislation and so it’s vital you are aware of the various risks and pitfalls having staff can bring. Ultimately, you need to be clear about the basis on which someone is retained (employed or self-employed) and clearly set out the rights and responsibilities of both parties in a properly prepared document. If you have employees, you also need to be sure you’re complying with all the relevant legal obligations that will befall you once you’ve taken this major step.