90 seconds with Charles Hylton-Potts on… Legal Formalities for Start-Up Businesses

It is best to consider the legal formalities before launching yourself headfirst into a new business. Early conversations with your accountant are also essential.

Choose the right structure

Sole trader or partnership may be simplest to get you started but could leave you personally exposed to financial or other risk. A limited company is likely to be the best vehicle to bring in investors whilst limiting your personal liability, but it may involve greater cost and administration. An LLP is another option. Tax advice will be key.

Select a suitable name

A strong brand name may be important, but carry out searches to check no one is already using it. If they are, your company incorporation may be rejected or, worse, you may later find yourself subject to an infringement claim. Also check that any desired domain names and social media handles are available, and register these.

Sign a founder agreement

A shareholder, LLP or partnership agreement is highly recommended to ensure each founder knows what they can, or more importantly cannot, do. A significant point to cover is whether a departing founder is obliged to transfer their share of the business to the others.

Protect your intellectual property

Consider registering your brand name as a trade mark to protect against others using it. Registering a design or patent may also be relevant if you have invented something. Get potential suppliers and partners to sign non-disclosure agreements before giving them any confidential information. Finally, have a solicitor review any consultancy agreement to confirm that any IP that is created for you is actually assigned to you.

Get it in writing

Prepare terms and conditions for use with your customers to ensure each party’s contractual obligations are clear, to comply with consumer law (if relevant) and for a smoother contracting process.

Comply with data protection law

If you intend to process the personal data of individuals, you will need to know and comply with the relevant law to protect the data and may need to register with the Information Commissioner’s Office.

Know your employment obligations

If you are employing a person or team, you will need a standard employment contract, an understanding of employment law and to register for PAYE. As your team grows, you may need a staff handbook and/or decide to set up a share option scheme.

Other requirements may include business premises (purchase, lease or serviced), a licence to run your business, compliance with health and safety law, and taking out appropriate insurance policies.

This article was written by Charles Hylton-Potts

Please note the contents contained in this article are for general guidance only. Legal advice should be sought before taking action in relation to specific matters.

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