What Are The Laws Around Starting A Business?

Are you planning to open your own business soon? That’s great, but there are a lot of legal compliance issues you should know. If you’re not sure about everything you need to start a business, especially concerning the legal side of things, let’s get you ready!


First some caveats though. We can’t guess what industry you’re in and there could be unique legal considerations such as licenses and permits. You and your employees need to understand the specifics that concern your business, and you’ll want to keep watching for new laws. Industry-specific blogs and newsletters often contain this important info or will point you to places that do. Subscribe to a few and keep reading the ones which give you the most support and community.


Also, many aspects of starting a business can be very complex based on ever-changing laws and where you live. There have been many legal revisions over time, so unless your life has revolved around following them, your best choice will be to ask someone with a lot of experience in that area: business consultants, certified accountants, law professionals and solicitors. You might end up with fines otherwise and just think of how much less stressful running a business will be with someone helping. Paying a little upfront can save you quite a lot down the road!


Business Plans & Funding

A plan for a business is how the owner will reach the goals of that business. This includes the products and services you’ll sell, how you’ll sell them, who you’ll employ or get materials and supplies from, the estimated business scale and customers, plus any other sources of funding. Knowing these things will help you decide many of the following legal considerations when you have a choice to make.


Remember that you can always change your plan if your business changes. You might start selling different things or in different ways, and in doing so you should also consider updating the business plan to see how that may change your thinking on all the related legal considerations.


Are you able to start the business completely with your own money? If so, you’ll need to register this investment in the accounts of your business for tax purposes. Did some of the money come from others? Make sure there’s a record of this and whether the money was a gift or a loan you will pay back. Friends and family should be informed that investing comes with the risk of loss, just as if they were investing in stocks.


Banks and professional investors often ask you to sign contracts before they give you startup money. Read all contracts thoroughly in case they make claims on ownership of the business or your ability to make leadership decisions going forward. Some of the contracts doing so are normal, especially with investing, and only you can decide if you will accept the terms.


When you talk to clients, customers, investors and other partners about your business, they can take that information for their own ends. One way to handle this is by never telling anyone the secrets of your business, but the better decision is to have them sign Non-Disclosure Agreements, also known as NDAs. These confidentiality contracts make them liable if they tell people things you don’t want to be told, such as recipes or development secrets.


NDAs do have some exceptions, like conditions which release the signers from silence. In most cases, they can also prevent someone from using your information for their own benefit, such as creating their own product with the same secret recipe. NDAs are important for businesses because mere ideas do not have legal protection, unlike patents.


Some things can be protected, such as your business logo or copyrights on fixed, recorded expressions of ideas. When you work with people who could potentially develop new business-changing ideas for you, always create contracts so that both sides know who owns the intellectual property rights.


Legal Structures Of Businesses

New businesses must be formed with a specific legal structure, and each type has different rules and regulations. These become especially important when considering how you’ll pay UK taxes and National Insurance.


In a Limited Company structure, the owner is legally considered to be separate from the business. If your business gets into legal trouble in the future, only your business assets will be considered as possible ways to pay up, and not your past wages or the things you purchased with them. You generally assign yourself a wage in this structure and that pay is subject to tax and National Insurance. The rest can go back to the business as you see fit, although remember that your business profits are subject to corporation tax.


This type of structure has a lot of regulations and legal formalities, such as filing certain records with Companies House. You might need to be an expert already or hire someone to make sure everything is done properly. If you know your way around business regulations and don’t want your property to be seized in any potential future legal issues, a Limited Company structure might be right for you.


Next up is the Partnership structure, also known as a Limited Liability Partnership or LLP. Here business revenue is shared as personal income, the LLP cannot be created with only one member (thus the partnership name) and your business must be a supplier of professional services such as accounting or consulting. All owners are charged with some limited personal liability when the business owes debts, but otherwise, the regulations around Partnerships are looser than a Limited Company. If you and someone else treat the income and debts of the business as your shared responsibility, and you’re supplying professional services, a Partnership structure might be right for you.


Finally is the Sole Trader structure, where the owner is legally considered to be the same as the business. This means if your business commits a crime, even accidentally, then you committed a crime. But you can also take money from the business however you like, rather than paying yourself a wage. If the bank account of your business is your bank account and you feel sure your business won’t get into any legal trouble, a Sole Trader structure might be right for you.


Since business revenue directly becomes personal income in both Partnership and Sole Trader structures, you’ll pay taxes and National Insurance on everything your business makes. There may be some considerations for business expenses so ask your local law offices for more information.


Business Contracts & Employment

Solicitors and law consultants will help you write solid business contracts with good terms for both sides. This includes co-founder contracts, employment contracts, the previously mentioned investor contracts and more. In business, contracts are a good thing because they create rules in case of disputes and problems.


When starting a business with a co-founder, a shareholder contract is a good idea so that everyone knows who will make final decisions for the business and run things day-to-day. Will the co-founder also be working for the business? They might need an official employment contract to make clear if they must meet certain business goals.


The general advice with employees is to always give everyone an honest understanding of their job, then to work them in fair fashion just as you would want to be treated if the situation were reversed. Employment laws change based on where you live and what kind of business you have, so make sure you know the local specifics. Being taken to court for unlawful treatment or a misunderstanding of the job scope takes time and money away from you even if you win, so avoid this by becoming the employer you would want to have!


A business should be safe for the employees, not to mention for the customers. This may require testing all of your tools and equipment to gain safety certifications. Without testing, someone who gets injured at your business can sue you for having this dangerous item. With the certification, their injury can be ruled due to misuse and you wouldn’t be liable.


Clients and suppliers may also need contracts to set expectations. How much material will a supplier bring you? Can you follow the terms and conditions of your supplier? Are your clients expecting work from you that you didn’t know about and can’t meet? The goal when answering these questions and creating contracts as a new business should be clarity for all.


Online & Virtual

There are many laws concerning online spaces and personal data, and this field is constantly changing. For example, businesses that collect customer data must meet data protection legislation. The subjects of your collected data have rights such as knowing whether you will be using the data for purposes they didn’t agree to. Your business should have a clear data privacy policy that tells people all of this, and of course, you need to know that information yourself.


Clyde Offices is a leading virtual office provider for new businesses in Glasgow. We have a range of support services including business mailing addresses, forwarding services, telephone answering and virtual assistants. Contact us soon and sign up for your new business!

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