March 22, 2019
There will be a million and one things running through your mind as you embark on the exciting journey of entrepreneurship and, undoubtedly, the legal issues that arise will not be number one on your list of priorities. In this blog, we outline the kinds of things you need to be thinking about when it comes to protecting your business and ensuring its success.
So, what legal protections should you be aware of when starting a business?
One of the most important decisions you need to make as a start-up business is which legal structure you are going to choose. This will impact your liability, taxation, management, financing and other key issues.
There are several different types of business entities but the most common for start-ups is a private company limited by shares.
A limited company is a private company that is completely separate from its owners. This means the owners are only responsible for any debts up to the value of their investment. The main points to note are that:
Once you have selected your company structure, you will need to decide who the key individuals are in the business. For example, if you do set up as a private company limited by shares, you will need to decide who the shareholders are and who you would like to appoint as director(s). Almost as important is ensuring that agreements are in place between the co-owners of the business to deal with any issues that may arise, and this can be done in the form of a shareholders’ agreement.
Top tip: many funding providers make it a condition of any facility that a shareholders’ agreement is in place.
Your company brand includes the type of product or service your business provides, your logo, slogan, company colours, design, symbols or other features that make your business identifiable to your customers. Your brand is what sets you apart from your competitors and in essence, is the identity and personality of your business.
Your brand can be protected through a range of registered and unregistered intellectual property rights such as copyright, trade marks, patents and design rights and you will need to consider who has created the work. This will usually be either:
If an employee creates the work during the course of their employment, the company (as employer) will be the owner of any intellectual property rights within that work, unless you have expressly agreed otherwise with that employee. The position is different, however, for independent consultants and sub-contractors. In such a case, the consultant or sub-contractor will own the intellectual property in the work, even though you have paid them to create it. It is therefore crucial to include intellectual property clauses in your agreements to deal with this point.
Employees are a vital asset to any business and ensuring that their conditions, rights, responsibilities and duties are set out in a legally binding agreement is extremely important. An employment contract will provide guidelines and expectations to be met and there are many provisions in an employment contract that can protect your business interests, for example:
Contracts are essential for protecting your business from risk. The contracts you need will depend on the type of business you are running, but you are likely to need some, if not all, of the following:
Establishing a solid financial base for your new business is essential. The right financial mix will cover your short-term needs and will allow you to make the most of growth opportunities as they arise. Investment finance can be great to cover costs and start-up losses as you may not be able to guarantee that you will have profits to pay interest on borrowed money when you first start out. The biggest advantage to equity finance is that the investor assumes all the risk and if your business fails, you don’t have to pay all the money back. However, you must share ownership and control of your company with your investors so make sure they share your business vision and goals!
Marketing and advertising your product or service is one of the primary ways in which customers will interact with your business, learn more about you and hopefully purchase what you’re selling. It is important that the advertising you do is honest. You shouldn’t make any false or misleading claims and, always ensure you have evidence to back up all claims before making them.
You will need to:
You will need to: