The Legal Implications of Starting a Business Explained

The Legal Implications of Starting a Business Explained

The Natwest and Beauhurst Startup Index estimated that in 2023, a record 900,000 businesses were started in the UK and according to the same index, active companies contributed £5.31 million to the economy. However, 11.8% of those new businesses closed. Whilst the lack of capital, poor market timing, and economic uncertainty are the main reasons for businesses not surviving past their first year, inadequate business models and a poor company framework must also be considered. Often, getting the right legal or financial advice would prevent the company from failing.

Choosing the Right Business Structure

In the UK, there are four main types of business structures, so it is worth discussing your business plan with a business solicitor who can advise you on which one would be best for your business goals. These business structures are sole traders, partnerships, limited liability companies, and limited companies. Below we have put together a reminder of how each type of business entity is structured.

Sole Traders

Sole traders are businesses run by one person. They are responsible for all the business assets and finances.

Partnerships

Partnerships are businesses run by two or more people who share profits, losses, and risks associated with business ownership.

Limited Liability Partnerships

Limited liability partnerships are business structures that involve a lower level of ownership for their owners. This means the owners aren’t accountable for company debts.

Limited Company

In a Limited company, the business is owned by shareholders and managed by a board of directors. The company must also publicly disclose its financial information to the public.

Having some knowledge of corporate law is essential

When setting up a business it is essential to have some knowledge of corporate law. This will help you when negotiating contracts, resolving disputes, and dealing with compliance issues. However, there are many times when you can’t resolve these issues on your own, so will have to rely on a business solicitor.

Contract Law

Knowing contracting law when you start a business will set you in good stead when negotiating with suppliers or resolving customer disputes. Moreover, knowing contract law will help new business owners when they negotiate employment agreements and non-disclosure agreements.

Intellectual Property

Securing your business’s intellectual property is a major step when setting up a company because it often constitutes a large part of its valuation. Therefore, the absence of intellectual property would be a major barrier to selling the business because the potential buyer might want to clear the rights to use the IP. If you are unsure about whether your IP is valid, we recommend you get in touch with an intellectual property solicitor.

Regulatory Compliance

Complying with your industry’s rules and regulations can be a minefield, especially if your new venture is in an industry, you know little about. Moreover, being aware of environmental laws and health and safety standards or consumer rights can prevent potential reputational damage to the company.

Setting Up a Legal Framework for Your Company

All these elements of corporate law are part of the company’s legal framework and help business owners protect their company and its employees. Even though the business owner can set up the company’s legal framework by themselves, it is usually a good idea to get advice from an experienced business solicitor who can help you find the best solution for your new venture.

What’s more, setting up a solid legal framework in which your company can operate is the best way to protect its assets including intellectual property, goods or services you supply. If your new business venture already employs people, you must consider company policies as an integral part of your company’s framework and can work together with an employment law solicitor to ensure that the rules and regulations in place are those best suited to your company.

Setting up a legal framework in which a new company can operate always requires specialist input to ensure you protect your business’ staff and assets in the best way possible.

Getting Advice from A Business Solicitor Will Help Any New Business

Your company’s legal framework is as important as the business plan you present to potential investors because it is what you rely on when you look for new customers or when times get tough. That is why you should seek advice from a business solicitor when you setup your company. Get in touch with The Eatons team to book an appointment at our offices in Bradford, Bingley or Yeadon.