Top 10 legal issues for start-ups
Launching your own business? According to Start-Up Britain, 125,517 businesses have been started this year (and counting), so you’re not alone. But make sure you protect yourself and stay on the right side of the law by swotting up on the top ten legal issues you need to be aware of.
1. Business type
It’s one of the first questions an entrepreneur will ask themselves, and one of the most important: What type of business are you, and what are the implications? Your options are to be a:
- Sole trader: this is easy to set up but a high-risk choice. If your business fails, you’ll be personally responsible for paying back any debtors using your personal assets.
- Partnership: this means more than one person is liable for the business. You will both be registered as self-employed and will have to fill in individual tax returns. Be sure to have the terms of the partnership enshrined in a partnership agreement.
- Limited liability partnership (LLP): there will be more paperwork involved in setting up a limited liability company and you will have to give HMRC your accounts records and tax return every year, but there is less financial risk involved. If the company folds, you will not be personally liable for any outstanding debts.
Private limited liability company (Ltd): Popular with professional services companies, each partner is classified as self-employed and enjoys the benefits of being a limited company (i.e they only stand to lose what they invest if the business fails).
2. Intellectual property and copyright
When you’re choosing your business name and branding, or even honing your product, you’ll need to make sure you’re not infringing any copyright laws, trademarks or patents to avoid getting fined before you even take your first order.
If you’re developing something new or want to safeguard your brand identity, protect your competitive advantage while you have it by patenting it or registering a trademark.
3. Health and safety
Before you start trading or hiring anyone, make sure you have a health and safety policy and you’ve carried out a risk assessment so you don’t fall foul of the Health and Safety Act.
You’ll have to consider providing clean toilets, enough space between desks, good lighting, a reasonable level of ventilation and set a comfortable temperature. If your business will use hazardous chemicals or machinery, your obligations will be even more stringent.
Franchises are an attractive option if you’re looking to take on something with an established brand. But it’s important you read and understand all the small print so you know exactly what’s expected and what protection you’ll have. Make sure that the terms are in line with the British Franchise Association’s Code of Ethical Conduct.
You have certain legal duties when it comes to your tax payments which will vary depending on your legal structure. Check if you should be VAT registered, what national insurance payments you will have to pay or if you’re obliged to fill in a tax return.
6. Employment law
You are legally bound to buy employers liability insurance if you plan to take on staff and you should make yourself aware of your main obligations.
For instance, you will have to pay staff the minimum wage or higher, give them a certain amount of time off between shifts and provide them with a secure and safe working environment. There are also a host of laws relating to parents’ rights when they get pregnant or after their child is born.
If this is too daunting for you, it might be best to seek the advice of an employment solicitor — this is an area you can’t afford to ignore.
7. Environmental concerns
There are certain things you’ll have to do to make sure you’re not breaking environmental laws, such as disposing of your waste appropriately. If your business will produce a large amount of air pollution or you’ll use hazardous chemicals, you may need a special permit. It’s best to check what your industry-specific requirements are with the Environmental Agency.
8. Do you need a licence?
Some business types will need to have a licence to operate, especially if there’s a potential risk to the public at stake. Some of the instances in which you’d need a licence include:
- If you sell food or drink
- If you use hazardous chemicals
- If you will operate in a public space managed by your local council
- If your business will operate and make noise late at night
9. Protect yourself
If your business sells advice rather than a tangible product and your client isn’t happy with your service (and suffers as a result of it), professional indemnity cover will buffer you from a costly lawsuit.
If your business is public-facing, you should consider public liability insurance in case a member of the public is injured while on your business premises.
10. Data laws
You’ll probably collect a huge about of data from both your customers and staff, and it’s vital that you have plans in place for protecting that data so you don’t breach the Data Protection Act and put people’s privacy (and your reputation) at risk.
You will have to consider how you collect and store data and be prepared to disclose what data, if any, you hold about somebody if a customer exerts their legal right to ask you.
Are you a recent start-up or are you thinking of setting up your own business? What are your biggest legal concerns?