If you’re preparing to start a business, one of the earliest legal matters which requires tackling centres around the structure of your business. Sole trader agreements, for example, are quick and easy to set up, and are therefore an attractive option for many first-time businesses. A sole trader keeps all profits and can run the company their way, which are alluring prospects for budding entrepreneurs. However, the flip-side of this is the fact that a sole trader is liable for all debts accumulated by the business, meaning its failure could result in assets being seized. Regulations for a sole trader are minimal, though require you to be registered as self-employed and to fill out annual Self Assessment forms.
A partnership follows similar lines to that of a sole trader, effectively, with everything being split. Profits, liabilities, and paperwork are shared between the partners, who each submit Self Assessment forms to HM Revenue and Customs, along with the business’s accounts. Although a partnership halves an individual’s liabilities, issues can arise if one of the partners has a greater involvement in the day-to-day management, potentially costing the other. It is therefore advisable to have a signed agreement drawn up before going into business.
Setting up a limited company presents the least personal risk, as liabilities are limited to the owner’s initial investment. However, the counterweight on this is in the form of extensive paperwork, which includes sending accounts to Companies House on a regular basis, and also requires legal advice from business solicitors to ensure the Companies Act 2006 is adhered to. Profits are also shared amongst shareholders. It would be sensible to discuss your business structure with solicitors, who would be able to advise you as to which structure presents the greatest benefit to your vision.
Legal matters aren’t limited to structure, unfortunately. Applying for a license may be essential , and many businesses require them, ranging from public entertainment, to hairdressing, to catering. Licences can often be applied and paid for through your district or borough council, however occasionally, you will be required to contact the county council or local government.
You’ll also need to keep more than one eye on health and safety regulations, as you will be responsible for any employees you may take on, visitors and the public. If your business operates in a ‘hazardous industry’, you are required to apply for a licence through the Health and Safety Executive. Regardless of your business, you will have to create a health and safety policy, and carry out regular risk assessments. The Health and Safety Executive website details regulations specific to a range of industries, so consult this to ensure you are running a safe ship.
So you’ve got a well-structured, licensed and safe business. But you still need insurance. Employers’ liability insurance is a legal requirement for businesses which plan on taking on staff. Various other industry-specific policies are available which could help protect a small business against claims and compensation.
It can seem like everything in the business world has legal ramifications of some kind or another, but as long as you are well researched, responsible and cautious, there is no need for your business to be on the run, rather than being run.