Small business legal advice: the do's and the don'ts

Small Business Legal Advice: The Do’s And The Don’ts

Linkilaw Legal Advice

Small Business Legal Advice: The Do’s And The Don’ts

So, you’re starting your own business. Woohoo.

Starting a business is exciting but don't forget your legal groundwork

With so much on your plate, it’s easy to forget the legal requirements…

Don’t worry, we’ve got you covered.

Today, we are summarising our top pieces of small business legal advice to ensure your startup is legally protected from the outset and throughout.

Do Not:

  • Do not create informal agreements

Are you thinking of hiring employees? Consultants? Freelancers? Doesn’t matter. In any case, it is essential for you to set out legally binding documents to ensure your agreements are being respected. Small businesses often incur legal troubles when they do not have the adequate documentation to hire and manage people. In the legal world, the general rule is that if it’s not on paper it doesn’t exist.

If you are interested in the legal differences between hiring an employee and a consultant we have an article here.

  1. Do not assume financing will be easy

Perhaps the most pressing aspects of starting a business is making sure you have sufficient capital to progress. This is generally sought after in three ways: bootstrapping, grants or loans. Before you decide how to proceed it is necessary to give yourself plenty of time to understand lending schemes or the details of bootstrapping.

Regardless of how you choose to finance the business, you will need to be extremely aware of how to budget your working capital. It is also necessary to understand that investors require a detailed plan of your startup before they make the decision of investing or not. Therefore creating medium to long-term plans and allowing yourself a realistic time frame to apply for grants and loans will also be a challenge.

  1. Do not underestimate the value of employer-provided benefits.

As a startup, you’ll find that offering your employees and interns attractive wages may not be an option. However, there are numerous other benefits you can give them to make up for it. Some of these are relatively easy to do on a budget:

  • Vesting

You can reward your employees by offering shares of the company over a period of time. This not only encourages them to work for you as they will have a stake in the company but it also incentivises them to work harder as they will regard their hard work to directly translate into the value of their assets.

  • Your business services

Depending on what services your business offers you can consider offering them to their families for free or at a discounted price. This can be quite convincing if you work in a relatively expensive or attractive industry such as healthcare, childcare or retail items.

  1. Do not ignore Intellectual Property Protection

Every business will have some form of intellectual property that must be protected. Your IP is what distinguishes your brand and individualises your business from competitors. Protecting your intellectual property requires you to recognise the value of your services and it is money well spent as it avoids costly lawsuits later on.

There are four principal areas of IP protection: Trademark, Patent, Registered Design and Copyright. Depending on your business you may want to consider applying for a few of these. This step must be taken at the beginning of your business as you often need to search through other trademarks before you get too attached to your business name, logo or sounds associated with it.


  • Do incorporate your company

It’s important to incorporate your business into the correct market. The main types of business are a sole trader, a limited company, or a business partnership. You can also form an unincorporated association if you are setting up an organisation with no intention to make a profit.

Most businesses choose to incorporate their company and become a limited company. In this case, the business’ income and expenses are kept separately from your own personal finances. Meaning that if you incur troubles your personal assets will not be touched. Furthermore, if you (or any other founder) chooses to leave the business can continue to operate as it is granted perpetual existence.

We have a full article on business structures here.

  1. Do get a shareholders agreement

At the initial stages of a company, the shareholder’s agreement is possibly the most important legal document you can create. It is only after the managing of the company is sorted that you can start running the business. A shareholders agreement is a contractual agreement between a company’s shareholders outlining how the company will be run. It should outline who will be involved in passing key decisions and how many shareholders make up a majority. The major reason you might want to consider it is because it’s normal for disagreements to arise between shareholders, but without a shareholders agreement, it will be uncertain how or who should resolve such disagreements.

  1. Do understand the companies act and create a director’s agreement

Although not compulsory, director’s service agreements, make the process of hiring, dismissing and spelling out your expectations of a director a lot more straightforward. The Companies Act of 2006 explains out the duties of a director for companies incorporated after 2006. Understanding the Companies act of 2006 clauses is fundamental as directors can be removed if they are found to be in breach of their legal or contractual responsibilities and duties.

  1. Do create employment contracts

Create employment contracts and protect your business

Although employment contracts are not a legal requirement employment law tends to be weighted towards employee rights. Meaning that without one it will be hard to prove any case and you will be opening yourself to vicarious liability. Getting employment contracts drafted by a lawyer will save you a lot of time and potential future costs.

  1. Do Respect health and safety policy  

The three fundamental UK regulations that you need to be aware of are: the health and safety work act 1974, Management of health and safety at work regulations 1999 and the regulatory reform 2005.

Similarly to employment law, health and safety legislation assumes that you are guilty until proven innocent. Meaning that the rule, if it’s not in writing it doesn’t exist applies even more so. In order to ensure you can legally demonstrate you adhere to these laws, you should create health and safety compliance reviews which detail and record the development of your health and safety policies.

So, here was our best small business legal advice to ensure your business is legally protected.

If you need any further small business legal advice don’t hesitate to get in touch.

small business legal advice