Welcome > Blog > Blog Posts > 4 Legal Issues Every New Business Needs to Know
19th February, 2015
I’ve worked with thousands of start-up businesses through a range of start-up support services, including Ready for Business and Virgin StartUp, and one of the most common hurdles they all face is understanding legal issues. We can help with business plans, loan applications and general advice, but when it comes to legislation, it’s worth talking to an expert who can advise exactly what applies to you and your business.
Starting a business can be exciting and rewarding, but its important that you get it right. Challenges can range from getting the right premises to ensuring you have watertight contracts to protect you from suppliers, customers and even your fellow businesses partners. So it’s important that you get some initial advice – this can help prevent unnecessarily bad decisions being made, which will ultimately cost you more in the long-run. We discussed the issue with Brendan Donohue, Partner at Bristol and Portishead based Burroughs Day, Quality Solicitors, who regularly advises start-ups and small to medium sized businesses, and knows the common pitfalls that many new businesses fall into. Here’s our top 4 legal issues that you need to be aware of:
Having the right Terms and Conditions of Business:-
Terms and Conditions of Business are an essential document which every new business should put in place immediately.
You want to ensure you have a binding, legally enforceable contract with your suppliers and customers. It can protect you against non-payment; help limit your liability to your customers; and set out a clear and legally compliant policy for delivery, returns and defective items. It will also help you avoid disputes arising at a later date.
One size does not necessarily fit all. Every business has different and changing needs and will require specifically tailored provisions. Some things to be aware:
The laws for contracting with consumers and businesses are different and your terms will need to be tailored accordingly.
If you are contracting over the internet, there are additional laws to comply with.
Standard terms and conditions do not usually include a “retention of title” clause. This enables you to retain ownership of the goods you supply until you receive payment. When properly drafted these are extremely useful in the event of a buyer failing to pay or running into financial difficulty.
If you ‘crib’ from other people’s terms and conditions, you can’t be sure that they are legally compliant, enforceable or drafted in the best interests of your business.
Only careful drafting can ensure your terms form part of the contract with your customer and take precedence over any additional terms introduced by them.
It’s therefore worth investing in some legal help at the outset. A solicitor can help you consider all of the issues you may face and resolve what should happen in each scenario.
Shareholder and LLP Agreements:-
Shareholder and LLP Agreements are confidential private agreements between the shareholders of a company or members of a Limited Liability Partnership (LLP). All companies/LLP’s need an Agreement as it sets out in an agreed framework for matters that are not covered in the constitution i.e. management and decision-making, dispute resolution, exit strategies and remuneration. It also protects the other shareholders or members if someone dies or becomes critically ill. The Agreement doesn’t need to be filed at Companies House.
It is advisable to enter into an agreement at the outset. It can be very expensive and time-consuming to resolve issues that arise at a later date without pre-agreed terms.
There is rarely a standard document. Every business has different and changing needs and the appropriate agreement will require specifically tailored provisions. From the simple to the very complicated, they need to be tailored to the specific business’s needs.
A business is really only ever as good as the people it employs. Having a comprehensive recruitment process and the right employment documentation is a major step towards protecting your business and your staff. Here’s why:
A properly drafted application form and thorough recruitment process are crucial for selecting the best people to work for your business. Training and then performance managing unsuitable recruits can be time consuming and costly; so can finding their replacement. You also have a duty not to discriminate against job applicants. If you do you will more than likely find yourself at the Employment Tribunal.
Make sure your staff contracts are tailored to your business and contain all of the necessary and legally required information – there are financial penalties if you don’t! Ensuring staff are clear about what is expected of them will reduce the risk of disputes and help you to defend any potential Employment Tribunal claims. An ‘off the shelf’ contract or policy won’t necessarily be suitable for your industry, or cover specific things unique to your business.
The right contracts can help prevent your employees from stealing your business idea or valuable clients. Where appropriate, you can also prevent someone from leaving to work for a competitor.
As a minimum, you also need to have grievance and disciplinary policies in place. They will set out your obligations as an employer to make sure you deal with staff complaints in the appropriate manner, and help you to follow a fair procedure if you need to dismiss someone. Getting it wrong could result in you not only facing an Employment Tribunal claim, but also further financial penalties if you fail to follow a legally compliant procedure.
There are additional policies that you should invest in to make sure you (and your staff) comply with your legal obligations.
Registering your logo as a trade mark:-
Intellectual property is something you or your business creates that’s different to anything else available on the market. It includes copyright, patents and trademarks and can be the product that you invent or your businesses logo. ‘IP rights’ (as they are commonly called) can become an extremely valuable asset for a business – something that’s not always thought about when a business is just starting out.
Registering your trademark gives you immediate protection from the unauthorised use of it by someone else. If your trademark is not registered it is much more difficult to take action against someone using it without your permission. It also promotes brand awareness and reduces the chance of confusing your trademark with another trader. The ® mark also provides your business with a recognisable symbol of quality.
Can I register my logo as a trademark?
The Intellectual Property Office describes a trademark as ‘a sign which can distinguish your goods and services from those of your competitors. It can be for example words, logos or a combination of both’. The only way to register your trademark is to apply to the Intellectual Property Office. If your trademark meets the necessary criteria you can register it.
Most people starting out in business focus their time on getting the orders in and making sure they get paid, which is totally understandable. However, taking a little time to think about your IP rights, and how they can protect the business in the long run, is well worth considering at the outset.
Written by Tara Gillam, Business West