A Letter Of Advice To Small Businesses
RE: Building A Business The Linkilaw Way.
Every day you fantasise about starting a business.
Building your idea from the ground up but you’re being held up by your lack of legal and commercial knowledge.
You type away on your computer, coffee in hand, trying to find out as much information as possible. Your internet history reads like a who’s who of ‘legal docs online’, ‘business document templates’, ‘legal agreement templates uk’ and ‘online legal advice’.
You need to know the do’s, the don’ts and the expressly forbidden. Look no further than this letter of advice to small businesses.
Stumbling across this letter of advice to small businesses will save you hours of time wasted scrolling through Google search results trying to find the advice your small business legally needs. By informing yourself using the simple steps below in this letter of advice to small businesses, you will save yourself headaches down the line and be aware of what your small business lawyers are saying during consultations with you.
Choose a business structure which is commercially advantageous
- Sole Trader
This business structure has low administrative costs per annum, is relatively easy to set up, are owned by one individual and finally have a small amount of financial reporting expected.
However, you are held personally liable for any losses your business may occur, pay more tax (income tax) and tends to lack a certain amount of commercial credibility in financial markets.
Would this work for you? If you own a low-cost running startup which you operate by yourself, this may be the business structure for you. Especially if you don’t mind being personally held liable for any losses.
Sharing all the benefits of a sole trader, but the business must have more than two owners who retain full control.
Sharing all the drawbacks of shareholders but full liability is shared if anything goes wrong and the partnership is quite difficult for owners to exit from or dissolve.
Would this work for you? If you’re a husband and partner who own a graphic design business and do not have any employees then this could be the business structure for you. Again though, you take the risk of being held liable for any loss incurred by any partner.
The most popular business structure in the UK due to its reduction in personal financial liability associated with other business structures. There is also a favourable tax regime and the ability to work with well respected and established corporate businesses.
A limited business does, however, have more administrative responsibilities to Companies House and has to make their accounts and financial reports public.
Would this work for you? This would work for any business with employees, or who wants to limit the debts they may be held to. Get ready to develop a love for Companies House entrepreneurial comrade.
Getting your small business’s legal documents in order
- Shareholder Agreement
If your business is owned by different stakeholders, or investment/loans have been made, this document lays out the obligations of the business owners and outlines dispute resolution or deadlock provisions. It could save you a lot of time and money later down the line.
- Terms and Conditions
If your small business will provide services or sell goods, this document makes your customers aware of their rights and responsibilities towards you and visa versa. It is an essential legal doc which often helps businesses avoid any potential legal conflicts.
- Directors Service Agreement
This is basically an employee agreement for a company director, the big guy or gal who runs the daily activity of the business. This document will lay out everything, including the pivotal non-compete clauses and salary provisions.
Making your small business’s website legally compliant
- Terms and Conditions
Like a normal small business’ terms and conditions, this contract will inform your website’s users of your legal obligations to them and their rights. For instance, if they purchase an item through your small business, when will be payment be due, how will it be processed, and what is your returns policy?
This educates your users as to what personal data you collect as well as how you collect store and share their personal data. Privacy policies also tend to have your business’s email address so customers can find out more from you about their data.
Users will read this policy to find out what cookies you will store, how you will store them and who they may be or may not be shared with. This policy also lays out the shelf life of the cookies you collect.
- Obtain intellectual property rights for your small business
If, like many small to medium sized businesses you have written unique material, designed a logo and created a brand, you will need to apply for a trademark, servicemark or a patent. Often the most valuable asset a business will own will be their intellectual property. It is pivotal you protect yours as soon as possible!
- Utilising specialists
No business is an island. It takes a diverse range of individuals to ensure a business functions and expands as it should. Building a business is like building your dream house. Would you outsource the building work to someone without any experience? No. So why would you download legal doc templates from the web? Anyone could have written them.
You will need an affordable legal specialist at your disposal to help when legal issues arise outside the remit of your specially drafted legal agreements.
- Download templates
By downloading templates from the internet you open your business up to so much risk. Templates never take into account the unique nature of every business. The stupid decision to use a template now, could all come to a head in 6 months, destroying your reputation and putting a severe dent in your finances.
Anyone could have written the template, even the barista who makes your morning coffee!
- Do nothing or hope for the best
You would be surprised by the number of individuals who stick their head in the sand. Although a hope and prayer are good at keeping you motivated they will not help you at all when Companies House comes calling about missing financial records and shareholder agreements. You need to start living by the mantra – prevention is better than a cure.
- Fix legal problems when they arise
Although getting unique legal documents drafted will help mitigate legal risk, it by no means will stop it arising in the first place. Lot’s of things happen beyond our control in a way a lawyer may not have expected. When this happens there will be the business owners who fix the legal issue as soon as they see it rearing its complex head and those who just leave it. By leaving it, legal costs could snowball. Get your legal issues resolved now.
- Hiring employees without contracts
When a small business needs employees, the mistake lots of business owners make is hiring individuals without any form of legally binding agreement. At the Facebooks, Ubers and Googles of the world, you can bet you’re given your employee contract before you even step in the door.
By not having an employee contract, a disgruntled employee could take your business to the cleaners. You need to ensure you mitigate this risk by getting your employees to sign an agreement.
I hope this letter of advice to small businesses has made you want to start building your business the right way.
Although this letter has provided you with information about making this dream a reality, every small to medium sized business is different. Let us find out your unique situation so we can provide you with more in-depth advice – all for free!