October 31, 2022
From deciding your business name to invoicing your first client, there are plenty of nuts and bolts to figure out when starting a business. We’ve helped countless companies get their burgeoning business idea off the ground, and have perfected a step-by-step approach to setting up a company. In this ten-part guide, we tackle insurance, contracts, intellectual property, directors, shares, and much more. From building your board, to scaling your company, here are our top ten things to think about when starting a business.
Perhaps one of the earliest decisions you’ll need to make - aside from conjuring up a business plan - will be deciding upon the legal structure of your company. The legal structure of a business impacts liability, management, taxation, and financing, and can shape what you can expect your new business to achieve. When it comes to business structures, there are quite a few to choose from, from private companies to sole traders. But which one is best for you?
A limited company is a standalone legal entity. This means, that the business is considered to be separate from you, meaning your personal liability is limited. In a limited company, you’ll be a shareholder of the business as the business owner, and you may well have other shareholders in the company. What are the pros of setting up a limited company? Well, there are quite a few…
Before scrambling to set up your limited company, it’s worth noting that this model can have its downsides. From stacks of admin to Companies House obligations, running a Limited Company won’t suit everyone.
The clue’s in the name with the partnership business structure - partnerships are made up of two or more people, who take on unlimited liability. In this type of business structure, partners share the risk, rewards, and profits of the business.
Unlike the traditional partnership model outlined above, limited liability partnerships are structured in such a way as to limit the liability of the partners involved.
Sole traders are self-employed business owners. This means that there is no legal separation between the sole trader and their business. While this means that sole traders get to enjoy the full breadth of their profits, it also means they are personally liable for the business and its activities. However, acting as a sole trader has its perks, from reduced admin to keeping all the profits made after tax. However, perhaps the most glaring downside of acting as a sole trader is the legal liability that comes with this business structure.
So, you’ve decided your business structure, what’s next? Business insurance is a crucial consideration when bringing your idea to life, and yet, it’s an often bewildering aspect of founding your own company. While employers’ liability insurance is the only type of insurance required by law, there will be many others that require your attention, for example:
When setting up your business, you’ll need to consider the building blocks of your brand: from its logo to its business name, to its intellectual property strategy. Perhaps you’ll craft your branding on your own, or perhaps you’ll enlist the help of a designer. Perhaps you’ll build your domain in Squarespace, or perhaps you’ll hire a website developer. Whatever approach you opt to take, it's a good idea to carefully consider your brand, its legitimacy, and your ability to protect it.
One of the more difficult aspects of brand protection is the high likelihood of copycats, and the inordinate difficulty in catching them. While you can register trade marks to protect your assets (and we certainly recommend you do!) keeping up with those trade marks can be a challenge. Saving on cost, time, and brand-value, our flamingo subscription monitors, manages, and protects your intellectual property assets - so you can focus on the good stuff.
Contracts will underpin much of your day-to-day business interactions, from securing new supplier relationships to providing goods or services to a prospective client. While it can be tempting to pull template contracts from the web, there are many risks in doing so. From ill-fitting contracts to terms that don’t benefit your business, often template contracts do more harm than good.
When building a company, you’ll want to follow a best-practice legal strategy that protects your interests as an entrepreneur, while fielding new business relationships. For this, you’ll want a suite of contracts that accurately reflect your business, its goals, and the service it intends to deliver - something that many template contracts just won’t be able to do.
Beyond business relationships, you’ll also need a suite of legal agreements, documents, and contracts related to the day-to-day running of your company. From privacy notices to terms and conditions, there will be a collection of documents you’ll need to meet legal obligations, define rights, and protect business interests. At a top level, these might include,
Depending on the business structure you choose, it’s highly likely you’ll need a board of directors to support you in guiding the company’s future. However, building your board is easier said than done. From tackling Companies House registrations to building bespoke Articles of Association, you’ll need to consider a host of matters when developing your board.
Have you sought funding? In this case, your investors may seek board representation to protect their interests. Before doling out a seat at the table, ask yourself whether investors are the best fit for the post, or whether there are individuals better suited to the task. Your board should represent your strategic vision, alongside accurately reflecting your market’s needs.
Often, businesses will fall into the trap of having a board that inadequately represents its people. While great strides are being made in terms of gender representation, much remains to be done to create truly diverse boards. Consider the avenues available to you in building a diverse team, and the impacts a diverse board can have on your business. According to a Diversity Study by Merit500, firms are 33% more likely to experience industry-leading profitability if their executive teams represent more cultural and ethnic minorities.
Your board acts as the seat from which key business decisions are made - meaning there are a series of legal obligations related to the role. For directors themselves, there are general duties, which include:
Beyond the duties of directors, as a business, you’ll also need to think about your Articles of Association (essentially the constitution of your business), registering directors and company changes to Companies House, and A Director’s Service Agreement to define the terms your company directors will work under.
While there will be many things you can do on the cheap, building a business has its costs. From purchasing a domain to hiring staff, your expense list will quickly grow as tasks build up. Depending on the nature of your business, you may consider raising money from external sources, whether that’s through equity financing, grants, or crowdfunding. Let’s take a look at some of the funding options available:
One of the more common methods of early-stage funding is equity financing. This is when you offer shares in your company to investors, in exchange for investment. Simple stuff! Unlike a loan, equity financing is not repayable. Instead, investors get involved with the hope of making a profit when the business is either sold or listed on the stock exchange. However, there are pros and cons to equity financing, which are worth exploring before diving into this form of fundraising.
Depending on your business, you may be eligible for a series of grants to fuel your business further. From Government apprenticeships to Innovate UK, it’s worth exploring the potential grants you could leverage for your business. Perhaps some of the most well-known small business grants include the British Council , the National Lottery Heritage Fund, Innovate UK, and the Seed Enterprise Investment Scheme.
The Seed Enterprise Investment Scheme (or SEIS) is particularly popular and provides investors with income tax relief at a rate of 50% on the value of an investment. And, in 2023, SEIS became even more popular, with the UK government increasing the amount of money a company can raise through SEIS, and increasing the trading limit. As a firm specialising in the support of fast-growth SMEs, we've helped countless businesses leverage SEIS through our flamingo subscription and can help you to make the most of this tax relief system.
So, you’ve set out your business structure, secured your insurance, and have begun closing deals. What’s next? While marketing your business won’t be the number one priority in the early days, it will become increasingly important as your business develops. You’ll need to begin thinking about how to differentiate your company from the market, how to communicate what you do, and how to entice others to join you on your journey.
Whether that’s achieved through social media or billboards, will be up to you. In the modern age, there is no shortage of avenues through which to market your business. And yet, there are a few things to be wary of before diving into marketing.
Email marketing is a particularly useful tool for business, and with the death of third-party cookies on the horizon, its importance is only growing. However, email marketing has a few key pieces of legislation to contend with, most notably - the Privacy and Electronic Communications Regulations (otherwise known as PECR ). These regulations set out rules related to email marketing, the use of personal data, and who can be marketed to (and how).
PECR has increasingly made headlines over the years, with countless business giants falling foul of the regulations, including Sainsbury’s cat food fuss in 2021. The risks related to PECR are quite hefty, including a potential fine of up to £500,000.
Leveraging email marketing for your business? Make sure it doesn’t inadvertently set you back half a million.
Partnering with bloggers and influencers can be a handy way of getting your business out to a broader network. What many may not realise, however, is that if a blogger or influencer has been given a product or service in exchange for the advertisement, they’re obligated to disclose this in their post or article. As a business leveraging these avenues, it’s a good idea to remind your partners of their obligation to disclose ads and to ensure they follow through.
As time goes on, you’re likely to have members of your team take responsibility for the marketing within your business. Before relinquishing the reigns, you should ensure they are trained on the legal stumbling blocks relating to marketing. You, or your team, will need an understanding of
As a business, it's highly likely you’ll be processing personal data in one way or another. And, as a result, you’ll be beholden to the world of data protection and its regulations. From GDPR to PECR, there will be a number of things you’ll need to be wary of from the get-go.
Under UK data protection law, there are a series of documents you need to host on your website:
The General Data Protection Regulation (or GDPR) is a key piece of legislation every business needs to be aware of. Designed to protect the privacy and security of individuals, these regulations set out a host of principles, obligations, and rules to abide by. At 88 pages long, however, it’s not an easy read.
As your business grows, so will your team! Depending on the nature of your work, you might need assistance from employees, workers, or self-employed consultants. But what’s the difference?
Employment status is crucial to get right, as it impacts the rights afforded to your team, your obligations as an employer, and the risks of getting it wrong. Unfortunately, distinguishing between employees, workers, and consultants isn’t always simple. That’s why we took the time to address employment status, including the rights available to each class of worker.
You may want to search further afield for top talent, which is where UK working visas will come in. From student visas to scale-up visas, there are quite a lot to choose from, including:
Who qualifies, and for how long, varies wildly from visa to visa, which is why it can be particularly helpful to speak to an employment expert. Our flamingo subscription can help you hire, incentivise, and manage your employees.
Share options and incentives will be a big part of your ongoing business, from securing investor appetite, to motivating employees in the long run. But what share options are available to you? And what differentiates them?
Perhaps the most popular of its kind, EMI share schemes account for over 90% of all employee share schemes in the UK. But why? Reduced capital gains tax and potentially no income tax, are among many of the reasons why EMI share schemes rule the roost.
For some companies, EMI share schemes just won’t be an option. This might be down to the number of employees within the business, or simply down to the nature of the business itself. In this scenario, CSOPs can be a handy option. Under this scheme, employees can be granted options up to a maximum of £30,000 each. Nifty.
This type of share scheme is becoming increasingly popular, in part due to its flexibility, its potential tax advantages, and the limitations founders can place on this particular scheme.
Certainly not! In business, there is an endless stream of options when it comes to shares and incentives, and many will come down to the specific goal you’re trying to achieve.
Founding a successful business is an incredible venture, but there is a long, long list of things to do. Worse yet, that list can quickly become an expensive hurdle to navigate. That’s why our flamingo subscription was created to provide founders with end-to-end legal advice when setting up and scaling a company.
We cover every stage of bringing a business idea to life, from the intellectual property of your brand to the division of its shares to the implementation of airtight documents. Better yet, it’s achieved at a fraction of the cost of a full-time lawyer, with the expertise of an expansive legal team that’s done it time and time again.
Our flamingo subscription is the solution for early-stage founders seeking to go the distance.