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A brief guide to the law for new and growing businesses

Starting a business can be exciting, but it can also be rather scary. Suddenly, you’re expected to be an expert in everything, from accounting to marketing to the law! There’s a lot to take on board and to be aware of if you’re going to avoid common – and costly – mistakes.

So - here’s a brief guide to some of the main areas to be aware of on the legal side of things. It is not intended to be comprehensive, so if you have any questions, please just get in touch, and I’ll be happy to help.

Get it in writing
Yes, really – you absolutely must. So many business relationships go wrong at some stage, and they are so much harder to resolve if nobody has a written record of what you agreed.

With a written agreement in place, everybody knows where they stand, and nobody can claim they ‘didn’t know’ if it’s all there in black and white. Misunderstandings are much less likely to arise, and if they do, they are much easier to sort out if there’s a contract that can be referred to. Never sign anything you don’t understand or are not happy with.

Make sure your contract covers all the key terms of your agreement: what the job or supply is, who’s paying who and when, what happens if delivery doesn’t happen on time, who will own any intellectual property rights that arise from the project, and so on. Don’t leave anything to chance. Pin down every possible eventuality, and ensure all possible outcomes – particularly worst case scenarios – are dealt with in your agreement.

Remember – the cost of a contract completely pales into insignificance with the cost of going to court, or with having to pay out to another party, or with losing business because you have no redress when someone’s pulled the plug on you... 

Terms and Conditions
All part of the ‘getting it in writing’. Ts&Cs are a must-have for your business relationships, and also for your consumers, if you sell to the public.

Set out clearly what you provide, when and by what method you expect to be paid, at what point title in goods is transferred, and so on. Don’t leave yourself exposed to late or non-payers – these are disastrous for cash flow.

If you have employees...
Get advice! Don’t take people on casually, thinking you can worry about the formalities later. That’s when things have a nasty tendency to go pear-shaped.

More than ever before, employment law is a real minefield for employers. It is now weighted very heavily in favour of employees, and changes regularly, so it’s absolutely vital that you stay on the right side of the law. Ignore employment law at your peril – you could find yourself in a very expensive tribunal.

What should you do? Get professional advice. Make sure all your employees have contracts of employment. Familiarise yourself with employment law as far as possible, and make sure you don’t hire or fire an employee or change their working conditions without getting advice first.

Health and Safety – there are regulations for a reason!
Health and Safety regulations apply to all businesses – the only thing that varies is the extent of your responsibilities. If you’re a one-man band operating from home, then there’s not too much you have to concern yourself with. If, on the other hand, you are a catering company with 15 employees, then your responsibilities are more onerous. But it’s not difficult to comply – get help from the Health and Safety Executive, or ring your local council.

Don’t leave things to chance. Failure to abide by H&S regulations may land you in court, and could even close your business. Remember, too, that government officials have the legal right to do a spot check on your business without any prior warning.

Get insurance cover
Insurance is your safety net for when things go wrong. Sounds obvious, doesn’t it? But so many business owners fail to obtain proper cover, thus leaving themselves exposed to hefty claims.

Once you have insurance, make sure you keep up with the premiums, too – don’t put that reminder letter on the back burner!

There are many types of insurance cover which relate to businesses – some obligatory, some useful, some of more marginal importance. From a legal point of view, though, you must – if applicable – have employer’s, public liability, and product liability insurance.

Keep data secure
If you keep any information about your suppliers, your customers, or your employees, then you will almost certainly need to register with the Data Protection Commissioner as a ‘data controller’. If you fail to keep such information properly secure – regardless of whether you register or not – then you could be liable to a fine of up to £5,000 and be charged with a criminal offence.

To register costs only £35 per year, renewable annually, and can be done online.

If you handle others' information, you should also put a privacy policy in place - this underlines your commitment to their privacy, and enhances your credibility with your clients.

Location, location
Buying or leasing premises? Setting up a business at home?

Property law, particularly commercial property law, is almost as much of a minefield as employment law. Don’t sign a lease agreement or an agreement for sale without getting it thoroughly checked by a solicitor first. Make sure your solicitor also explains to you your exact rights – and, more importantly – your obligations under any lease.

If you’re setting up a business at home – check your title deeds or lease for restrictions. Many properties have restrictions on what you can and cannot do. If the property is your own, make sure you notify your mortgage lender and your insurer, otherwise you may invalidate your mortgage and insurance cover.

Look after your intellectual property
If you’ve ever watched Dragons’ Den, you’ll know that intellectual property (IP) is a hot topic right now.

If you’re in the business of being creative, make sure you don’t lose control of what you create. If you have employees, the law generally assumes that whatever they produce becomes the employer’s property – but don’t take it for granted. Make sure their contracts say as much. If you use freelancers, the contract will need to be explicit as to who will own what; the law makes no automatic presumption in your favour.

And if you work with others on particular projects, make sure that you have everything covered. If you’re developing something, you might want to get everyone to sign confidentiality and/or non-disclosure agreements. You’ll also need to decide who has the rights to what as the project proceeds – and what happens if it gets abandoned before it’s finished.

Want to read more?
There's more, much more, in A Zest for Business, a book I recently co-authored for start-ups and growing businesses. Click here to find out more and to order a copy.

Any other questions?
If you've got any questions about this guide, or about any other legal problem to do with your business, or if you just want to get on and have those documents drafted - get in touch now, and let us help you put your business on the right track.

© Helen Parkins, 2008. All rights reserved.