Five things you need to know about the law and starting a business

It is always exciting when you decide to start a business. You have an idea, and you have summoned the courage to make it as your own boss. But what happens next?

When setting up as a sole trader, you will find the legal requirements relatively straightforward. However, when you start involving other people, whether it is as staff or as shareholders, you will face some legal issues that might require a solicitor’s assistance.  

In this article we talk you through five of the potential issues you might need to address and some essential advice to get you started.

1) Registering as a business

When you are a freelancer working alone, you do not have to register with Companies House. However, you do need to register with HMRC and sile your accounts each year. However, if you choose to become a limited company with multiple shareholders or a partnership, you will need to register your business and officially claim the business name.

You might want to seek advice about the best option for you. Alternatively, you can search online or outsource business services to guide you through the different options and the steps you will need to take, for example, determining the Singapore company incorporation requirements.

Some businesses also require licences before you can trade. Often with such a company that needs a licence, some complexities need to be addressed. At this point, you may wish to approach a solicitor for advice and guidance, so you trade within the law.

2) Insuring your business

As soon as you start a business, you lose all the protections you enjoyed as an employee. The idea that someone else is responsible if a member of the public is hurt. What about the time you get ill, and you need more than two weeks off work? Then, there is the possibility that someone doesn’t pay up for work done, and you have no income. 

Working for yourself comes with freedoms, but it also comes with additional responsibilities. Insuring against the possibility that something could go wrong is essential and not something to tag on at the last minute.

If you are going to employ someone, you need an Employer’s Liability Insurance as a law. Equally, the law requires those offering services such as healthcare and architecture to seek professional indemnity insurance. Should something go wrong because of your work, you will need this insurance to pay the compensation costs due.

You should get other insurances that are not legal requirements; for instance, you might need insurance against cyber-crime. It is worth seeking advice about the package of insurance that is most suited to the business you are starting.

3) Becoming the boss

Employment law is a complex area, and seeking professional advice is sensible. For instance, it is illegal to discriminate when hiring someone due to their age, gender, ethnicity, disability, and more. The recruitment process offers many pitfalls for those who are unsure of the legal issues involved.

Problems can start with the job description if it isn’t specific and based on the skills and experience required, and then carries through the interview and candidate choice. Certain questions asked could make your life complicated when you choose your new employee over someone else. 

Discrimination is just one area where legal advice might be needed. The management of performance and dealing with those who underperform is equally tricky. Having an external HR advisor is often a wise choice for those new to business.

4) Managing the ever-growing issue of data

GDPR UK or the UK’s General Data Protection Regulation is an issue that all businesses need to consider no matter the size. You must effectively manage the data you collect, ensuring that it is kept up to date and secure.

You will be expected to explain what purpose this data will be used for and how long it will be kept. Breaches in data policy can be costly to your public image, and in a world where reputation is essential to the success of a business, it is vital to get this right.

5) Hiring a solicitor

The question of when you need a solicitor or not is difficult to discern. You can definitely start a business without the need for legal advice. Being a freelancer only requires basic actions and can easily be managed by the business owner.

Even when setting up as a limited company, as long as you are the only shareholder, the process is relatively simple. The point when other people become involved in your business is a turning point. Disagreements and conflicts occur when you have to manage the concerns of others. At this point, it is usually wise to seek advice on your legal position.

In conclusion, you should think carefully about the legality of your small business before plunging head first. If you can identify any potential problems early on, you can avoid them turning into bigger headaches a month, or year, or several years into your business venture. 

Colin Bates is the Director of Mackenzie and Dorman, a leading solicitors based in Belfast, Northern Ireland.