LEGAL EAGLE: Setting up your own business

Starting out in business can be a headache, especially if you’re going it alone or your business partners are also new to the game.

I often advise start-ups, and the first thing I look at is the legal formation of the business.

For example, are you setting up a limited company? If so, are you up to date with all the obligations in the Companies Act that you need to comply with?

Maybe a partnership would be more appropriate as this saves you from all of the Companies Act requirements. However, as a partner in a partnership you could be personally liable for the business debts and so you need to give this serious consideration.

A limited liability partnership could be the answer, but a business solicitor will be able to advise you.

New businesses need to consider premises carefully.

Are business premises really needed in the first few months, and what’s the plan to pay the rent while the business gets off its feet?

You also need to consider the length of the lease, and how this fits in with your forecast for expansion.

You don’t want to limit your business expansion by being stuck in a long lease for inadequate premises.

You also need to consider whether your premises need any licenses, especially if your business is selling alcohol or showing live entertainment.

If you are going to take on staff, you should be up to speed with employment law.

Do you know what the National Living Wage is?

Are you familiar with the rules around holiday entitlement, the workplace pension, and statutory sick pay?

Make sure you know which documents you need to see from your employees to be satisfied of their right to work in the UK.

If you get this wrong, you may end up subject to a Home Office investigation and a hefty fine which could close your business.

However, like Byron Burgers, you might have a defence to this if you can show that you’ve carried out all the relevant checks required by law.

Depending on the nature of your business you will need clear terms and conditions or service agreements for your clients.

You will need to give your solicitor as much information as possible about the way your business will run, so that they can advise you about the T&C’s you need to protect your business.

However, T&C’s should always be a balance between protecting your business and being fair to your customer.

Make sure your T&C’s set out terms of payment very clearly.

Businesses should always budget for a level of bad debts but, if your debtor hasn’t responded to a final warning letter, you may be able to pursue a claim in the county court and try to get a CCJ against your client to manage recovery of the debt.

Having a robust debt recovery procedure in place is essential to avoid debts becoming stale.

l Paula Harris is Head of David Gray Solicitors’ Business Team which carries out work under the Law Society’s ‘Lawyers For Your Business’ scheme and assists many SMEs in all aspects of business work.

You can call for an appointment with Paula on 0191 243 8147 or Chat Live 24/7 at www.davidgray.co.uk.