How to avoid le­gal pit­falls and get new busi­nesses off to the best pos­si­ble start

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Belfast Telegraph - Business Telegraph - - News - By­cather­inecooney, Part­ner

Start­ing out in busi­ness is daunt­ing and most start-ups will want to fo­cus on build­ing the busi­ness and bring­ing in money. How­ever, it is im­por­tant to take the right le­gal steps at the be­gin­ning to avoid time-con­sum­ing and expensive is­sues later.

This short check­list is de­signed to help busi­nesses mit­i­gate the le­gal risks and achieve com­mer­cial success. • 1. Le­gal struc­ture: You need to choose the right le­gal struc­ture to suit your cir­cum­stances and am­bi­tion. You can set up as a sole trader, part­ner­ship or com­pany.

This is one of the most im­por­tant de­ci­sions you will make from the out­set.

Sole trader: Runs his/her own busi­ness as an in­di­vid­ual, is self-em­ployed and per­son­ally re­spon­si­ble for any losses the busi­ness makes.

Part­ner­ship: There are dif­fer­ent types of part­ner­ship, but this can be a rel­a­tively sim­ple way for two or more peo­ple to run a busi­ness. You will need a part­ner­ship agree­ment to set out how de­ci­sions will be reached, how equity is di­vided and as­sets split up at dis­so­lu­tion.

Com­pany: Gives cer­tain pro­tec­tion over per­sonal as­sets and greater le­gal pro­tec­tion in case of dis­putes. You must choose the type of com­pany, an avail­able com­pany name and reg­is­ter with Com­pa­nies House. For share­hold­ers you will need le­gal ad­vice to draft a share­hold­ers’ agree­ment to gov­ern the re­la­tion­ship be­tween the share­hold­ers and the com­pany, e.g. the process for share trans­fers or sale of busi­ness. • 2. Pro­tect your brand: You will need to seek spe­cial­ist ad­vice on IPR pro­tec­tion as the brand is an­other im­por­tant as­set of the busi­ness. This could mean trade­mark­ing, copy­right pro­tec­tion, de­sign regis­tra­tion or patents. • 3. GDPR: You need to un­der­stand how GDPR af­fects your busi­ness and what pro­ce­dures need to be put in place. You should seek le­gal ad­vice in this area to en­sure com­pli­ance. • 4. In­sur­ance: This is es­sen­tial to pro­tect any busi­ness. Check whether your in­sur­ance cov­ers le­gal ex­penses in­sur­ance, and shop around to get the best pack­age. • 5. Con­tracts: The im­por­tance of con­tracts is com­monly ig­nored by start-ups but can cost the most in terms of expensive lit­i­ga­tion. Prob­lems oc­cur when a cus­tomer/ client won’t pay for a prod­uct/ ser­vice. If you have a con­tract you are in a stronger po­si­tion to take le­gal ac­tion, and many dis­putes can be mit­i­gated or even avoided by good com­mu­ni­ca­tion up­front. • 6. Em­ploy­ees: Make sure ev­ery em­ployee has a con­tract and a staff hand­book with the right poli­cies in place. A con­tract will min­imise the im­pact of any dis­putes and pro­tect the busi­ness, e.g. shar­ing of con­fi­den­tial in­for­ma­tion and restric­tions on de­part­ing em­ploy­ees. Re­mem­ber to check your re­spon­si­bil­i­ties in re­la­tion to the workplace pen­sion. • 7. Lease: Ne­go­ti­at­ing a new lease with a land­lord can be dif­fi­cult but it is im­por­tant to seek ex­pe­ri­enced le­gal ad­vice. Many new busi­nesses will need an early break clause in the first 12-18 months and mit­i­ga­tion against expensive di­lap­i­da­tions costs by agree­ing a con­di­tion re­port so that there is no dis­pute upon ter­mi­na­tion. • 8. On­line pres­ence: Pro­tect your on­line pres­ence by en­sur­ing that your web­site in­cludes the terms of use and also a pri­vacy pol­icy. • 9. Regis­tra­tion and records: It is im­por­tant to re­mem­ber to reg­is­ter the busi­ness with HMRC and re­tain ac­cu­rate fi­nan­cial records. • 10. Com­mon mis­takes: The most com­mon pit­falls are choos­ing the wrong le­gal struc­ture or fail­ing to put proper con­tracts in place.

This check­list em­pha­sises the im­por­tance of get­ting the right le­gal ad­vice from the out­set so that your busi­ness is ef­fi­ciently struc­tured to grow and suc­ceed. Catherine Cooney, part­ner in cor­po­rate, com­mer­cial and char­ity law with Wor­thing­tons Solic­i­tors, ad­vises busi­nesses and char­i­ties on a daily ba­sis. She reg­u­larly ad­vises on set­ting up new busi­nesses, merg­ers and ac­qui­si­tions, re­struc­tur­ing, draft­ing share­holder agree­ments, draft­ing and ne­go­ti­at­ing of con­tracts, ad­vis­ing on gov­er­nance and com­mer­cial leases. For ad­vice, please tele­phone 02890279500 or email catherine@wor­thing­ton­slaw.co.uk

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