Matt Thompson
Associate Solicitor
Howes Percival LLP
ACCORDING to the Department for Business, Energy & Industrial Strategy, at the end of 2017 there were estimated to be 5.7 million SME businesses in the UK which employ over 26 million people, and have a combined turnover of nearly £4 billion.
The number of new business registrations keeps increasing, with a 64 per cent increase since 2000, but if you were to assess every single legal aspect that was required to be put into place prior to setting up in business, or to continue running a business, it can certainly be enough to put some people off! So what are the key points you need to think about right at the outset? We think, as a bare minimum, you should at least think about the following:
* Should you start up as a sole trader, a partnership/limited liability partnership or should you be looking to form a limited company to trade from? All these structures have their pros and cons – sole traders are less regulated but a limited company has the benefit of limited liability. It isn’t just worth thinking about this from a legal perspective – from a tax perspective, it can be more favourable to have one structure over another. Your advisers should be consulted early on to ensure you understand the best vehicle for your business.
* If you are going to employ someone in your business, then it will be essential to make sure that you are compliant with employment law. If you do not have the correct documents in place for your employees, then you can incur significant fines and penalties, as well as compensation payments in an employment tribunal. As important as having the right documentation, is a basic understanding of what to do and what not to do in relation to dealing with your employees.
* The premises you are looking to trade from could be anything from a spare bedroom, a unit in a start-up business centre, or a unit that has been built and is readily available in the market. Again, taking professional advice will be crucial to ensure you understand your rights and responsibilities. You would not want to become liable for expensive dilapidations and repairs on entering into a lease commitment for a building. It will be essential to take advice from a surveyor and property lawyer who can advise how to minimise the risks.
* Do you have in place a robust set of terms and conditions of trading for your business, so that you can negotiate the best outcome if you have a problem with a customer or a supplier? Before you make your first sale or purchase, make sure your terms are tailored to your business and cover your processes and procedures – every business is different so the likelihood is you might need something bespoke.
* If you are creating ideas, products or processes, you need to be thinking about how you can protect your intellectual property rights. Can your ideas be patented or trademarked? Similarly, have you made sure you are not infringing someone else’s ideas? The last thing you want as a newly incorporated business is to be infringing someone else’s trade mark by virtue of your trading name.
* If you are dealing with personal data, whether that is of your customers, suppliers or employees, under the new General Data Protection Regulations, you do need to ensure that you are processing data correctly. Have you got in place the correct notices, policies and procedures in place on your website and do your contracts adequately deal with this?
Overall, most successful businesses recognise the need to take independent experienced professional advice to ensure their venture is successful, whether it be from HR consultants, accountants, bankers, insurance brokers or indeed from solicitors. There is plenty of advice available out there, but getting the basics right from the start can ensure you are protected from issues in the future!