1. What Structure should my business take?
There are many different structures a business may take. The most common are:
- Partnership – No formal set up requirement. A partnership is automatically created where two or more people go into business together with the intention of making profit.
- Sole Trader – A sole trader is quite simply one person who sets up a business. As a result, they are entitled to all profits and liable for all losses. Again, no formal set up is required.
- Limited Company – a separate legal entity, limited companies offer its shareholders [the owners] limited liability. This means in the event a claim is made against the Company, the shareholders are only liable for the amount of shares unpaid.
- Limited Liability Partnership – a hybrid between a company and a partnership, an LLP offers its members limited liability.
Imitation is the best form of flattery. Unfortunately, in a business setting this can result in a loss! Consequently, it is necessary to protect your business’ intellectual property.
3. Employment Contracts
If your business requires employees, there is a requirement for you to provide each employee with a written statement of particulars.
Should an employee have reason to bring a claim against the business, i.e. for dismissal, the failure to provide a statement of particulars may result in further sanctions being imposed.
4. Terms and conditions
Depending on whether your business deals with consumers or other businesses, can affect the governing legislation. The Consumer Rights Act 2015 was introduced to consolidate consumer protection laws. However, this only applies to business to consumer contracts.
It can be fundamental to ensure your business has terms and conditions to provide adequate protection, in addition to legislation, in order set out the terms the business contracts on.
5. How will the business be financed?
It is usual for money to be borrowed in some form in order to finance the start-up of a business. However, many do not consider the ramifications of this in the future.
It may therefore, be necessary to include an agreement to cover the repayments terms or secure assets in the business.
6. What happens in the event of death of a party?
Usually, upon the death of a shareholder in a company, the shares held by the deceased shareholder pass under a will. This may lead to someone who has previously had no involvement in the company, now being required to make decisions. This can be circumvented by the implementation of a Cross Option agreement.
Partnerships work differently. Under the Partnership Act 1890, the death of a partner results in dissolution of the partnership. Many Partnerships therefore, put a partnership agreement in place so they can govern exactly what happens upon the death of a partner.
7. Where will the business work from?
If the business is leasing premises, it is fundamental to ensure there are no restrictions in the lease to carry out such activities.
Depending on where the business carries out work from, may also effect the content of their terms and conditions.
8. Data Protection
The General Data Protection Regulation comes into force on 25 May 2018. Its aim is to govern what personal information is collected and saved by businesses.
Entities are taxed differently. For example, Sole Traders are considered as self-employed and therefore pay income tax and National Insurance contributions, whereas, a Company pays corporation tax. Thus, advice of an accountant should always be sought when looking to start up a business.
10. What technology is required?
Businesses need to carry out activities such as bookkeeping, usually requiring software. They should therefore be fully aware what they are signing up to at the point of entering into a contract for such software and how they may possibly terminate such contract should the requirement arise.
This article provides a brief overview of the top 10 key things you should consider when starting up a business.
It should not be considered as legal advice and should in no circumstances be relied upon as such. Please contact a member of the team of EHL Commercial LLP should you wish to discuss the content of this article or how EHL may assist you.