With over 5.7 million businesses in the UK and 99.9% of them classed as small to medium enterprises, there’s a lot of legal ground to cover.
From protecting your products from copyright issues to ensuring you have the correct company structure, it can be a minefield starting or growing your business.
While paid advice is accessible from lawyers and solicitors, the basics still need to be readily available. So, to save you a fortune in advice fees, we’ve put together some legal advice for small business owners.
Here, we cover business structure, copyright, licenses, taxes, and insurance.
Small Business Legal Tips
The legal world is complex, especially when launching a start-up or attempting to grow a business. We’ve tried to ease your headache with the legal tips below.
Choose Your Business Structure
Setting up a business isn’t as simple as registering with Companies House. There are several types of business structures that differ considerably. In addition, they will impact your liability and credit, so be sure to choose the right one.
We break them down and what you should know about them.
Sole Trader
A sole trader is the most straightforward form of business to register and the one that most people choose when starting out on their own.
You are self-employed and a sole trader if you work for yourself and keep all profits after tax has been paid. However, you are liable for all losses – extending to your personal assets, which can be risky if you borrow money but can’t pay it back.
Partnership
A partnership involves two or more individuals sharing the profits and losses of a business. Thus, the risks, costs, benefits, and responsibilities are all shared between the partners.
Similarly to a sole trader, a partnership’s liability extends to personal assets, which can be risky. However, the tax and liability are shared between the partners.
Limited Company
A limited company is privately managed. Shareholders own the company, and it is run by directors and is a separate legal entity – meaning the finances and risks do not extend into the owner’s personal finances.
The profits stay within the organisation after tax has been paid. Only once the tax has been paid can profits be distributed via dividends.
Limited Liability Partnership
A Limited Liability Partnership, or LLP, is similar to a partnership. However, the fundamental difference is that the partner’s liability is not extended to personal finances but instead is limited to the money they invest in the company.
The organisation must be registered with Companies House and with HMRC, as with a Limited Company.
Name and Protect Your Business
When launching your start-up, the last thing you want is a fight with another business for the name you came up with. Or being taken to court over a name you’ve accidentally stolen.
It’s always wise to research your business name before registering with Companies House or choosing your business structure. For a start, what’s the competition on Google for your desired business name?
But, more importantly, some names are restricted, and others are already taken. You can check trademarks on the government trademark checker.
The same goes for your products, too. Look into trademarking or copyrighting your property to prevent battles in the future.
Obtain Required Licenses and Permits
Some industries and businesses require permits to trade. For example, a bar or restaurant needs a Premises Licence to serve alcohol legally.
Before throwing open your literal or metaphorical doors to the public, you should carefully research which permits or licenses you require to trade.
You need a licence for CCTV operation, background music, environmental impact, financial services, and even a TV licence – to name just a few.
You can check which licenses you may need using the government licence finder
Register for Taxes
Registering for taxes with HMRC is imperative for your business and should go without saying. However, there are a few types of tax that need to be paid, regardless of which business structure you’ve opted for.
Sole traders are required to pay income tax and national insurance on their earnings via a Self-Assessment tax return.
Larger corporations will have to pay corporation tax, which is currently 19% in the UK.
Elsewhere, Value Added Tax (VAT) should also be paid, along with PAYE for employers and employees.
Business Insurance
Whether you’re running your business from home or a shop, it’s crucial that you invest in business insurance. Insurance can protect you, your employees, and your customers, so it’s an essential cog in making sure you’re covered legally.
Furthermore, insurance can cover your stock, premises, and equipment. Find a good insurance broker to help find the best deal for you in terms of cover and savings.
If you’re operating in the public domain, you’ll also likely need Public Liability Insurance. Public Liability Insurance covers the cost of claims made by members of the public for accidents or incidents that happen on your premises or in connection with your business.
Hire a Lawyer or Solicitor
Although we’ve given an overview of small business legal tips in this article, you should always have a lawyer or solicitor in your list of contacts.
Legal help can go over contracts with you, represent you when it matters, and give you sound advice when you come unstuck.
The internet is full of hints and tips, but there’s no substitute for a legal expert.
The Bottom Line
So there you have it, the basics of getting started in the business world. While this free small business legal advice is reasonably comprehensive, don’t be afraid to reach out to a legal professional if you’re really unsure.
Furthermore, the government website is full of resources for business owners. It also has guidance on which structure you should use, information on taxes and licenses. Bromley Local Authority are also able to offer guidance.
Always double-check before entering into a contract, pay your taxes on time, choose your structure carefully, and consider a solicitor. If you stay sensible, you can stay safe.
