Starting your own business can be a daunting step to take, but more people than ever before are taking the big step into their own brave new world.
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Whether you are thinking about setting up with a business partner, or going it alone, there are some key points to consider from the word “go”, say Martin Ewan and Tom Boulton-Jones, corporate law experts at Brodies LLP.
1. Select the appropriate legal structure
Will you run your business as a sole trader? With a business partner? As a limited company or some other corporate vehicle? The most suitable option will depend on your objectives and the most tax efficient way of achieving these. Speak to your lawyer to choose the most appropriate structure. For example, incorporating a company requires more administration, but your personal assets will be protected
2. Choose your business name carefully
Ensure that it is not the same or too similar to the name of a current business or an existing trade mark, as legal action can be taken against you to prevent you using it. If incorporating a company, check the UK company registrar’s guidance on “sensitive” words i.e. words that can imply business pre-eminence or a particular status. For example, if you want to include “Scottish” in your company name, there are additional permissions required. Don’t forget to do an online search to see if there are any problematic company names already trading.
3. How are you going to finance the business?
If you do not have the resources to self-fund, will you rely on debt or equity finance (money from shareholders) – or perhaps crowdfunding? A bank loan will undoubtedly require you to provide some security, whether it is over your company’s assets, your house or in the form of personal guarantees from you and your business partners. Equity finance may come from family and friends or an external investor, such as a business angel or a private equity firm. Each of these options has advantages and disadvantages which you should consider with your advisers.
4. Keep proper records
No matter what form of finance you use, it is imperative that you open a separate business banking account and that you properly record your finances from day one. Either engage an accountant or ensure that you are comfortable with managing your own book-keeping system, many modern software packages make this process much easier. If you have incorporated a company, then you are legally required to create and keep up-to-date certain company registers. You also have to notify Companies House of certain changes relating to the company (e.g. changes to the constitution, to directors’ details, or to share capital). Professional advisers can provide a company secretarial service to handle these administrative matters for you.
5. Protect your interests
Ensure that any arrangements with investors or partners are properly documented and that your intentions and expectations are protected. Draw up standard terms and conditions for the business which can be incorporated into any purchase and supply contracts. This will not only put you in a better negotiating position, but will also ensure that key material risks are covered. Consult your lawyer before you enter into a contract if you are unsure about the legal consequences.
6. Consider the appropriate base for your business
Do you need to rent or can you work from home? Depending on your business, you may be able to save time and money by setting up an office at home, especially if you’ll be conducting most of the business online. If your business requires larger premises, then get legal advice before entering into any lease agreements, particularly those that are long-term, as these are often very difficult to terminate early. You may wish to look at serviced offices, which may be more expensive but are more flexible. Another option might be office space available especially for start-up businesses. This can include advice, access to wi-fi, IT equipment and a chance to work alongside other entrepreneurs.
7. Protect your intellectual property
This, of course, depends on the nature of your business. You may need trade mark registrations, a patent application, or perhaps confidentiality agreements, also called non-disclosure agreements, with your business partners. The law in this area is complex so it is important to take legal advice, especially if your business value is centred on intellectual property. For example, you may be surprised to know that an invention made by an employee is not automatically owned by the employer.
8. Promote your business online
In today’s environment, most companies need some form of online landing page, whether a website, social media or both. If you are setting up a website, then it is often useful to hire a professional designer to ensure that it looks professional and performs as well as it can. Even if you have the knowledge to build your own website, it is worthwhile testing this with friends and colleagues before it goes live to ensure it provides the user experience you need it to.
Crucially, you should ensure that you own the rights in the text and images on your website, even if it has been produced by a third party designer, and that hosting arrangements for your website are appropriate. For example, how easily can you terminate the contract and how would transferring material from one hosting company to another actually work in practice?
Brodies LLP is a sponsor of the Entrepreneurial Masterclasses being held in Portree, Inverness and Fort William on February 7, 8 and 9 To register your attendance, please visit Lochaber Chamber of Commerce website .
