Are you thinking of setting up a new business in 2014? If so, congratulations! Operating your own business can be a rewarding and fulfilling venture, but, at times, it can also feel like sailing against a tide of rules and regulations.
Knowing the laws that apply to your business and how to comply with them can help to make life easier. Breaking the law through ignorance is no defence and may result in financial penalties or even imprisonment – get informed!
The first thing you should decide is your trading status – sole trader, partnership or limited company.
Sole trader:
You will need to inform HMRC that you are self-employed, you take on the risk of the business personally but gain from the relative simplicity of the structure, as there is less paperwork than alternative structures and complete control.
Partnership:
Two or more people start a business, sharing the workload and investing capital, you share the financial risk of failure but there is another risk to consider, the risk of falling out! Partnership agreements are not required by law but we strongly advise you to have one. If you don’t, you will be bound by the terms set out in the Partnership Act 1980 which allows a partner to withdraw without giving notice and to insist on the immediate return of their capital contribution. This can be a minefield and a complex area of law, so, if you can, take professional advice from the outset. Setting out expectations in an agreement can often prevent the breakdown of the business relationship later.
Limited company:
This must be registered by sending the necessary forms to Companies House. In terms of personal risk, this is the safest way to operate in business and the structure is by far the most versatile but it comes at the price of increased red tape and greater tax considerations.
If none of the above suit your needs there are other less common structures such as the limited liability partnership and the company limited by guarantee. Accountants, bankers and solicitors are all more than happy to explain the pros and cons of these structures to you.
There are lots of other things to consider… You may also need premises, be careful when signing lease agreements – if you move your business and sell the lease on you could find you are liable for the debt if the next person defaults.
Finally you will hopefully get some customers! If you hold information about identifiable individuals you may need to notify the Information Commissioner’s Office. Even if you are exempt from notification, you must still abide by the rules of the Data Protection Act 1998. This applies to information on websites as well as computer and paper records. It is a criminal offence to break the law on data protection – you could face a fine, custodial sentence or community service.
Sarah Sillar, a Solicitor in our Commercial Team, says “These are just a few of the areas that need to be considered very carefully, there are many more – employing staff, agreements and contracts, intellectual property. Whatever your motivation for making this brave leap, it won’t always be straightforward. At Frettens, our team of lawyers are passionate about helping you stay afloat and would be happy to meet you to discuss your business venture.”
For a free initial chat, please call 01202 499255 and Sarah or a member of her team will be happy to discuss any questions that you may have.