Starting a business is really tough. You’ve thought of everything in your business plan, done your market research and are eager to get out into the world. But what about the legal stuff? Has all of that been properly considered? If you’re not a legal person, it can be daunting and you may not know where to start. Here are some points to consider: not all, but perhaps enough to get you started.
Protect your idea This is your baby, you’ve worked tirelessly on it. Don’t let anyone else steal it. You could consider taking out Intellectual Property (IP) Rights Protection which falls into four main categories
- Trademarks: remember that a trademark is different to registering a business name-registration does not give you exclusive rights. A trademark can range from a character to packaging, so get registering… think the M in McDonald’s!
- Copyright: in simple terms, the right to copy. It is an exclusive right that owners of IP have. If you have it, people can’t copy without your permission!
- Designs: if you create a design that is new and distinctive, register it. Registered designs can be licenced or sold and therefore utilised for commercial purposes.
- Patents: if you have created an invention that is new, innovative and useful you should consider registering a patent- an exclusive right to the invention for a period of time.
Protect yourself Why wouldn’t you? Get terms and conditions – a standard detailing the terms of conditions of business between you and your customer may protect you from a difficult situation later down the line. Whether your business provides products or services, a document outlining your terms and conditions is essential. The contract should set out the agreed terms between you and your customer and perhaps more importantly, what happens if something goes wrong. Consider also the relationship between you and your supplier and the terms and conditions of those contracts.
OK; now that’s out of the way, there are a few other things to consider.
Going solo or starting out with a partner? As a sole trader, you do not have a separate legal existence from the business. You and the business are one of the same. You benefit from the profits (yay!) but at the same time are wholly responsible for the business’ debts (not so yay). You are considered by HM Revenue & Customs (the tax people) to be self-employed and must therefore register for self-assessment as soon as you start trading.
If you have a business partner, you and your partner will share the business responsibilities, profits and will be responsible for your tax based on your share in the business. You share joint responsibility for the company. Make sure these terms are clear by creating a Partnership Agreement detailing business liabilities, ownership, profit shares, what happens if you need to leave the partnership and in the unfortunate circumstance of the death of a partner, otherwise those decisions will fall to statutory default position. Partnerships must have a ‘nominated partner’, who is responsible for record keeping and managing tax returns.
You could set up a Limited (Ltd) company. Whether on your own or with a partner, Limited Company structures are attractive because you (and your partner) will not be personally liable for the company debts meaning that your personal assets are protected if the business fails and any investment money lost. Importantly, it is only your investment at risk! The downside of starting is the initial and ongoing administration tasks, such as incorporation, adopting Articles of Association and particularly unattractive the requirement of filing accounts etc.
Lastly, Limited Liability Partnerships (LLP) are a balance between Partnerships and Limited Companies. The main benefit being, like Limited Companies, that you are not personally liable for any of the business’ debts. The main difference between setting up as a Limited Company or LLP is the tax position. LLP’s are taxed in the same way as an ordinary partnership- you must register with HMRC as self-employed. LLP’s must be registered at Companies House (although filing duties are not as excessive as Limited Companies!) and an agreement must be in place outlining the distribution of profits.
Regardless of the kind of business you run, you are legally required to keep records. These records include anything and everything.
Let’s talk taxes…
The amount of tax you pay will depend on various factors, such as business structure, annual turnover, taxable profits and perhaps in the future- whether you employ staff. The main business taxes are Self-Assessment, Corporation Tax and VAT and Pay As you Earn if you employ staff. If you’re unsure, make it a priority to speak to a tax advisor!
Insurance? Public liability, premises- leases, employment, machinery, stock, business continuity insurance all need consideration. They do increase overheads but may save your wallet some day!
Don’t forget your GDPR responsibilities duties- head over to what is gdpr for a quick reminder.
Lastly, the Equality Act prohibits businesses from discriminating against, harassing and victimising certain classes of persons when they provide a service (whether or not that service is for payment). For example, making reasonable adjustments for disabled users.
So there it is, a glimpse into the legal stuff to consider when starting a business. No it isn’t the most exciting part, but it is important to get it right. Make sure you do what is right for your business as these points will not all be applicable to your business – but they may severe as useful points to consider if your business exceeds your expectations!
I wish you all the best, and if you do require any more advice on the points raised here, or with any legal matters, contact me at Georgia.Duggan-Edwards@gamlins.com