So you have decided to start your own business and whether it is you on your own or if you have put together a great team with a unique product or service idea — congratulations! It is exciting indeed. However, the next step is making sure the legal details of your business are all in order.
It might seem like a drag, but taking the effort to be on the right side of the law (and the taxman) now will save you considerably on time, money and mental expenditure later. We have put a handy checklist together to help you out:
#1 — Get your business incorporated
Incorporation is a critical step that you should complete on priority. Get all your documents in place, check that your Articles of Association are in order, get the permits to use your place of business and check that documents like share certificates have been issued properly.
Use this service to register your company with Companies House. You will also be registered for Corporation Tax simultaneously. You will receive a “certificate of incorporation,” which denotes your company exists legally and highlights the company number and date of formation.
If you do not get incorporated now, it could lead to nasty consequences later in which your contracts and investments might become void. Visit the government website for what you need to do. Or an accountant could do it for you.
#2 — Get any permits you need
Check whether there are any special permits or licenses you need before starting a business. For instance, if you run a pub, you will need a liquor licence. Some of these might take a while to come after you file, so start early. Speak to an accountant if you are unsure about exactly what you need. The paperwork can get tedious, so be prepared for that.
#3 — Make agreements with your co-founders
A proportion of startups with two or more co-founders end up having disputes about rights and responsibilities later on. If you are a solopreneur, you do not need to worry about it.
However, if you have co-founders, chalk up legally binding founder and shareholder agreements beforehand and lay out the conditions of being lawfully involved in the company operations, including how you will be dividing profits and what ESOP each position is entitled to.
#4 — Consider having a company secretary
You might think the big headache is over once your company has been incorporated, but there is a lot more to do. Company directors are obliged to submit various forms and declarations throughout the year as per Companies House. It might be worthwhile to hire a company secretary to handle all these formalities so that you can focus on running your actual business.
#5 — Have clear employee documentation
It is legally mandatory for every company to have a comprehensive employment contract in place. This helps you avoid legal disputes later about what your employee is entitled to.
Plus, if you are working with independent contractors (such as freelance writers), consult with your accountant on what the rules are. Depending on the volume of work they are doing for you, they may be deemed full-time employees by the law.
#6 — Protect your IP rights
Unless you have trademarked and copyrighted all of your intellectual property, you risk competitors poaching your ideas or even claiming them as their own, which could lead to costly disputes later on.
If you are developing something entirely new, be it a product or service, it is wise to get a patent on it. Patents are expensive and difficult to get, so must be absolutely sure about what you patent and what you cannot. The government has information on how to do this here.
#7 — Do not forget about data security
No matter what industry you operate in, data protection is crucial. Please register with the Information Commissioner’s Office and refer to their website for essential details regarding storing, transferring, and processing data related to your customers, suppliers, and employees.
This is especially important if customers will be paying online for your products or services through a payment gateway. You have to take precautions to safeguard their sensitive data.
#8 — Register for taxes
The HMRC is a government body you do not want to mess with, so be sure you register for Corporation Tax and VAT (if applicable) well in time. Failure to do so could lead to unnecessary stress later on if the HMRC chooses to investigate your business.
Ask your accountant for help. On that note, be sure you have a good accountant on whom you can rely on for filing your annual returns and getting you the best tax benefits. 3E’S helps a variety of businesses sort out their taxes. Reach out to us if in doubt!
#9 — Get insured
Not all types of business insurance are compulsory (some are), but having extra safeguards in place can save you massive losses if something unforeseen happens. For instance, if your work takes you around public spaces, you may want to invest in public liability. In addition, be sure to have employee liability coverage in place up to £5 million if you have any employees at all.
#10 — Stay on top of trading laws
Remember that there are hundreds of laws related to trading and commerce that you will have to keep in mind once you start a business. It is best to have appropriate policies in place, from NDAs to customer terms and conditions to purchase policies to vendor disputes.
In addition, be sure to stay in touch with your accountant so that they can inform you of any changes to laws that you need to be aware of.
Over to you
Many people aspire to run their businesses. If you have decided to take the step, we applaud you. It would help if you planned every aspect of your business properly to minimise legal risk and financial implications.
While we can manage all your accountancy needs, from VAT and payroll to bookkeeping, you need to first lay the groundwork for your business. If you need help with that, please email us at info@3esaccountants.co.uk or fill out the contact form and drop us a short message.
