If you plan on starting a business this 2022 in the UK, whether small, medium-sized or large scale, there are legalities you need to consider as part of your business planning stage. Carefully observing these legal aspects can protect your startup company from any untoward problems in the future, especially that we are now in the modern age of entrepreneurship.
Here are top 5 legal pieces of advice on how you become a successful entrepreneur today.
No. 1: Pick the best business structure.
Generally, there are four types: sole trader, partnership, limited liability partnership, and limited company. Knowing and understanding the advantages and disadvantages of each will help you in your decision. You are to consider the nature of your business, number of owners, tax incentive opportunities, and liability attached to the owners and or the business as an entity.
The sole trader business structure is good for those who want to go solo in running a business. These are people who work for themselves and prefer to handle things on their own rather than having to think about other owners in a company. In terms of business registration compliance, this is the easiest to apply for. You just need to register with HMRC. However, although sole traders enjoy their business profit solo, they are the only ones who shoulder the payment for tax and insurance. They are also alone in dealing with legal liabilities in the future.
A partnership is formed when two or more individuals join together in starting a company. Most of the business owners who choose this type are close friends who share the same interests or career. In this set-up, there is equal sharing of profits or losses, as well as any risks or liabilities of the company. All the partners are liable when one is negligent.
Limited liability partnership is for those people who like the idea of investment-based liability. This means, their liability is proportional to the money they invested. They are to register their business with HMRC and Companies House. They can be an incorporated LLP too.
We also have what is called a limited company, which is co-owned by all shareholders, who elect a set of board of directors to oversee the overall management of the business. The profit described as dividend is evenly distributed to all the shareholders based on their number of shares. All the rules behind are laid out in a legal instrument called shareholders agreement.
No. 2: Consider business insurance.
Now, the first question you need to ask is, does the law require for my business to get insurance coverage? The answer depends on what type of business you are going to own and manage. We have mandatory employers’ liability insurance for companies who have employees and staff. We also have professional indemnity insurance, which is required for those whose work is to advise people on finances (ex. accountants) or legalities (lawyers); this protects them against professional liability claims. You can seek advice from insurance lawyers who are experts in insurance laws and disputes.
No. 3: Put all agreements into writing.
No matter what agreement, make sure to have it in writing. Do not accept, worst, normalise agreements made on chat or video. Have everything in a legal document, not just completely signed, but also witnessed. E-signatures or digital signatures done via DocuSign eSignature and other signature platforms, are considered legal in the UK so take advantage of it, especially if you are hiring employees worldwide. Set forth all the terms in the contract clearly to avoid legal disputes. Ask help from an experienced company law solicitor about this.
No. 4: Study employment laws.
Labour laws are complex and evolving. And as a business owner, it is best that you have good knowledge and understanding of employment laws. This is especially relevant if you are outsourcing tasks from independent contractors online, in contrast to companies who have their employees and staff in their physical office. Otherwise, your business will get in trouble with the Internal Revenue Service.
No. 5: Hire a corporate law firm.
With all the legalities your business may face, one of the best decisions you can ever make is to hire and retain a corporate law firm. Through this, you’ll have peace of mind knowing that whatever legal issues you face, your corporate lawyers are always ready to defend you. A team of corporate lawyers can handle all your legal documentations, intellectual property concerns, employment agreements, website legal disclaimers, and more.
Every business deserves to have expert legal advice, so hire a corporate law firm or company law solicitor now!
Writtern By – Omar Shams
