You’ve had a great idea for a business; you’ve set yourself up and may even have staff working for you; perhaps you’re now looking for your first premises or your first client seeking professional legal advice at the earliest possible stage will actually save you money in the long-term and avoid frequent pitfalls.
Decide on an appropriate business vehicle
If you have just started up on your own, the likelihood is that you’re a sole trader. Being a sole trader is actually the most exposed (in many ways) and you risk your own personal assets. Conversely, they have the fewest regulations to adhere to whilst companies have the most reporting obligations, but are significantly protected. There is now also a growing structure: Limited Liability Partnerships (LLPs) which has the best of both worlds for some businesses– do you know which is right for you? Do you understand the risks and benefits or your liabilities?
Protect your business ideas
Trade marks, company name registration, domain name registration and other forms of intellectual property protection can help protect your valuable business ideas and developing goodwill from being exploited by others. Unfortunately, this happens all too often. You do need to think about protecting a desired name at Companies House and trade marking that name in the UK or abroad, perhaps also securing your ideal website address.
‘Limited liability’ is afforded to those running companies or LLPs. What this means is that when problems are encountered, it is the company or LLP which is sued, not the individual/s behind it. This may be the best way of avoiding personal liability, but insurance is also usually a must – Public and Employers Liability insurances are the most common, and those who allow the public access to their premises should ensure that this also covers Occupier’s Liability. In addition, if your business heavily relies on one or two key individuals, ‘key person’ insurance should also be considered.
Obtain your premises
Deciding on a 3-year serviced-office; 80-year full-repairing lease, or a freehold premises can be a daunting task. Each have immediate financial consequences such as the Rent, Deposit, Stamp Duty or Purchase Price, Repairing Liability, Service Charge and Rates. In addition, should you be giving personal guarantees for the performance of your business? Many landlords will request these for new businesses, but it would well be worth your while offering a Rent Deposit instead to avoid the risk of personal liability if something went wrong.
Ensure your documents are up to scratch – whether you use Purchase Order Forms, have Terms and Conditions, or have no ‘standard’ paperwork whatsoever, you should have written contracts and these need to be effective in two ways – protecting your cash flow and tying your customers into the terms in which you want them to behave. Effective (and concise!) They can be seen in a positive light as in how transparent your business processes are – most people for example do not mind being charged for something, so long as they knew about it at the outset! If and when a dispute does arise, these contracts need to be able to cope with the scrutiny that they will inevitably be placed under.
Know your obligations when employing staff
Getting the right Employment Contract (for an Employee) or Contract For Services (for contractors) can be the instigator of harmony between you and your staff, and can also save the day when it comes to disputes later on. Do you know what liabilities you have to your staff under Employment Law? Have you planned for the necessary statutory allowances, such as sick pay and maternity leave? Do you recognise the legal differences between an employee and a contractor? Generally, there are much fewer obligations when taking on self-employed individuals, but you still need to be careful that they aren’t ‘deemed’ to be employed.
Ensure you are contracting with the right person
This may sound obvious, but when pound signs are flashing, due diligence about who you are contracting with flies right out of the window. In a litigation claim, for example for an unpaid invoice, one of the most important factors is identifying who the contract was actually with! If contracting with a company, check they are registered at Companies House, and confirm their registered number – a company can change its name several times, whereas the number always remains the same.
Make sure your business processes are legally sound
You may have excellent Terms and Conditions, but did you know that if the customer’s attention is not drawn to these before the contract is formed, then they are not incorporated at all? The offer and acceptance process can be complex, especially when dealing with two or more sets of Terms and Conditions (for example when dealing with another business) and you need to ensure that the way you do business ensures that your Terms are superior. There are also terms that are imposed into contracts for goods or services by law, and each business will have different terms implied.
And finally… Disaster planning
What if the worst happens and your offices burn down, or you and your business partner fall out or one dies? What if the business needs to be wound-up, or parts of it need to be sold? Having Director/Shareholders/Partnership agreements in place can help to avoid many of the big decisions turning in to even bigger disputes. Not to mention make sure your Wills are updated as to your new business interests.
For more information contact us…
0207 426 0382