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28 October 2015

Considerations when setting up your own business

Setting up your own business can be a daunting task, spending some time considering the following points at the outset can help save time and stress in the long run.

1. Structure

Many people choose to go into business as sole traders to begin with and then incorporate into limited companies further down the line.

There are numerous tax and legal benefits to running your business through a limited company, and recent changes to the Companies House website (which now has an online service which offers a lower incorporation fee and means many documents can be filed electronically) means that the administrative burden is easier to manage.

If you choose to operate your business through a limited company your personal liability (for example if you are unable to pay creditors) will be limited.

That being said, you are likely to find (often when renting a property or borrowing money) that you will be asked to give a personal guarantee. You should always give careful consideration to a request for a personal guarantee before agreeing to any such personal liability.

If you do decide to run your business though a company you must ensure that when you enter into any agreements with customers, creditors or anyone else, you do so in the name of the company and not in your personal capacity.

2. Terms and conditions

If your business will be selling goods or services then the terms on which you sell will be crucial. You should consider, among other things, your credit terms, your liability and whether a retention of title clause would assist you.

If you are contracting with consumers there are specific laws and regulations which you must follow as consumers are automatically given more rights than business customers. You should be fully aware of these so that you can tailor your terms accordingly and not be caught out.

If contracting with another business you should always look to complete a sale or contract for services on your own terms, however a business customer may (particularly if they are a larger company) insist on using their own terms. If they do so then you should carefully read the terms before entering into the contract. There are complex rules regarding whose terms are being used, which involves looking at who sent the last set of terms before the contract was entered into, and you need to be aware of this.

3. Branding

For many businesses their name and logo are a major trading asset. While copyright exists without the need to register a particular name or logo (thereby offering some protection) a registered trade mark gives stronger protection for your brand. It is more difficult to bring a claim against someone who is trying to trade off of the reputation you have built than if you are forced to rely on copyright law, rather than a registered trademark.

Registering trademarks can be expensive and so it may be something that you consider a little further down the line when you know that the business is doing well.

At the outset, you should carry out a check of the trade mark register (which can be done at www.ipo.gov.uk) to ensure that you are not infringing anyone else’s trademark with your logo or trading name.

You should also check the Companies House website using the WebCheck service. This allows you to search for companies who may already be using the name you haven chosen. A simple google search is also beneficial. You do not want to find yourself in the position where you have already started building up a reputation only to find that you face a legal challenge and are forced to rebrand.

Businesses that are creating new products or designs should also understand how to further protect their rights through patents and registered designs.

4. Websites

You may decide to advertise and sell your product over the internet and indeed many companies choose to do so as a more cost effective way of advertising and trading.

The first step will, for most, be contracting with a web developer to build the site. You need to check the contract with them carefully and be sure that you have the necessary rights to run the site and will take ownership of it once it has been built.

You will also need to give consideration to the legal requirements, which include having privacy and cookie policies, as well as terms of use documents and displaying certain business details.

If you are selling online (or over the telephone) then you will be covered by the Distance Selling Regulations which give consumers additional rights, including a right to cancel the contract and receive a full refund. You should be sure you fully understand these rules and have appropriately drafted contracts before you start trading online or over the telephone.

5. Insurance

Insurance is very important and in some circumstances a legal requirement. You should speak to your insurance broker about what type of insurance might be required.

6. Banking

Many banks offer start-up packages to new businesses. These can include training sessions on how to manage your accounts and other administrative matters. As with all aspects of starting a new business, you should shop around and find the best offer to suit your business.

7. Employees

When you first start out you may be taking on the lion’s share of work yourself, but as the business grows so will the need to delegate some of the work. You should seek specialist advice on the practicalities of taking on employees and the best method of doing so.