How can our business start-up solicitors help?
Stephensons has a breadth of legal experience in all areas of business, with various departments working together to ensure start-up companies conduct their legal affairs correctly.
Our lawyers for business startups can provide a range of commercial services to start-up companies on a fixed fee or tailored basis and can offer access to a vast network of other business professionals including accountants, banks, surveyors and insurance brokers. If you would like to speak to a specialist business start up solicitor call us on 0161 696 6170.
Do I need a solicitor to start a business?
While not legally required, having a solicitor can be highly beneficial when starting a business. They provide expert advice on legal structure, contracts, compliance, and intellectual property, helping to avoid potential legal issues and ensuring a solid foundation for your business.
Incorporation – becoming a limited company, sole trader, partnership or limited liability partnership (LLP)
Your new business can be set up in a number of ways, each with a different legal status. They are:
Limited Company: the legal liability begins and ends with the company, subject to the company being run in the manner expected by the Companies Act 2016, not you as an individual. Being a director brings certain obligations such as choosing a registered and trading address, having particular roles and responsibilities, filing accounts at Companies House, setting up a business bank account, regulatory compliance, etc.
Operating a limited company can have certain tax advantages for the directors and obtaining the advice of an accountant at the set up stage is vital to ensure that such advantages are obtained.
Sole trader: within this simple structure you are operating as an individual but don’t have limited liability with your business’ financial affairs. You are taxed as an individual and don’t have specific, regulated duties in the way a limited company director does. However, you should still seek legal advice on your liabilities.
Partnership: this involves going into business with one other person or multiple people, in which the debts and the assets of the company are jointly owned. This structure is often used when bringing two specialisms together – such as solicitors and accountants. Everything between the partners is equal, unless stated otherwise in a legal agreement.
LLP: a partnership with limited liability for the partners, which means liability doesn’t extend to their personal finances. This company type has to be incorporated at Companies House, therefore the information is in the public domain.
Shareholder/partnership agreements
These govern the relationship between the shareholders or partners, setting out how a company is going to run. Amongst other things, it determines how key decisions are to be made, what happens if a director or partner wants to leave, what restrictions will be enforced on their relationship with the company’s clients or contracts and how shares will be valued.
It’s vital to get advice so agreements between the business owners work in practice. And there are often legal issues beyond the knowledge of the partners which should be addressed.
Choosing premises - lease/ownership
You may choose to buy or rent business premises. That means knowing your obligations under a lease, such as break clauses (for example, during a 10-year lease you may be able to exit the lease after five years if certain steps are followed) or the condition that you need to return a building in when you exit a lease.
You also need to be sure that you can use the premises for the purpose of your business: there might be a covenant preventing this.
Contract terms and conditions
A contract is the foundation of a successful business and mutual understanding between a supplier and customer. Getting paid is clearly essential for a business to operate and having a contract is fundamental. It governs what your business does and how you are going to get paid. It needs to outline your customers’ obligations, what happens if something goes wrong and what the payment terms are, including interest on overdue accounts. Without a contract, you have no contractual right of recourse and might end up in court relying upon the discretion of the court to determine the terms of the agreement which is far from ideal.
Handling employees
Having an employee statement of terms in place is a legal requirement so that both parties know their obligations. A company handbook sets out various policies and good practice which – if followed by you and your staff – should limit any potential claims brought against the company. Having access to legal advice about employment law helps you get it right with employees from the start.
Intellectual property
If an idea or concept belongs to your company, make sure you protect it. Obtaining trademarks or patents for unique ideas needs specialist legal advice. Further, you should be ensuring that your contracts stipulate that you retain ownership of your intellectual property.
Finance
Lawyers can help new businesses by referring you to reputable companies providing access to finance and assisting to create the right documentation to secure investment. In fact, Stephensons is directly involved with the Business Growth Hub, helping hundreds of business in Greater Manchester.
Insurance
If something unexpected happens in your business and you’re not insured there’s both a financial and a legal implication: you could be committing an offence and face penalties. So, ensure you have adequate insurance which covers professional indemnity, employer liability, building and contents cover, fleet insurance for vehicles used on business and credit insurance to protect against non-payment.
Licence to trade
Depending on your particular industry, you may require a licence to trade. For example a vehicle hire company or operating a licenced premises. A law firm can help you identify which licences you need to comply with regulations and assist with the relevant applications.
Health and safety
You need to be aware of your health and safety obligations to employees, visitors and the general public. That means conducting risk assessments and having policies to ensure you protect people who come into contact with your company and, in turn, reduce the risk of accidents happening and potential investigations and prosecutions by the Health and Safety Executive.
FAQ's
What is the process for setting up a new limited company in the UK?
When considering whether to establish a limited company, it’s important to first assess if this structure fits your personal and business needs. Consulting with a registered accountant for tailored tax advice can be invaluable in making this decision.
Choosing a unique and appropriate company name is a crucial next step. The Registrar of Companies will review your proposed name and may reject it if deemed offensive or unsuitable. It’s wise to conduct thorough research, consider long-term branding, and check for available domain names to secure your online presence.
A limited company must have at least one appointed director, although appointing a company secretary is optional. Alongside this, identifying the shareholders is essential; there must be at least one shareholder who can also act as a director. Additionally, you need to recognise any Persons with Significant Control (PSC), generally those holding more than 25% of shares or voting rights.
Drafting the company’s governing documents is another key stage. The articles of association outline how the company will operate and are automatically applied based on the Companies Act 2006 unless otherwise specified. Since these articles are publicly accessible, shareholders often choose to create a separate, private shareholder agreement to cover internal arrangements confidentially.
Maintaining accurate records is a legal requirement for limited companies. This includes statutory registers and financial documents, which are often managed with the help of an accountant or other professionals.
Finally, the company must be registered at Companies House. This process requires providing a registered office address and selecting an appropriate Standard Industrial Classification (SIC) code that reflects the nature of your business activities.
Do I need a shareholders’ agreement?
While a shareholders’ agreement is not legally required, it is highly recommended. It sets out the rights, responsibilities, and obligations of shareholders and provides a clear framework for matters such as decision-making, dispute resolution, share transfers, and exit arrangements.
Unlike the company’s articles of association, which are publicly filed at Companies House, a shareholders’ agreement is a private contract between the shareholders. This allows for greater confidentiality when dealing with sensitive or bespoke arrangements.
Relying solely on company law and the articles may leave important issues unaddressed or open to interpretation. A well-drafted shareholders’ agreement can help reduce the risk of disputes and protect the interests of all parties involved.
What is a cross-option agreement?
A cross-option agreement is a legal arrangement commonly used in business succession planning between shareholders or business partners. It outlines what happens to a shareholder’s shares if they die or become critically ill. The agreement typically includes mutual options: the surviving shareholders have the right to buy the deceased shareholder’s shares (a call option), and the deceased shareholder’s estate has the right to sell those shares to the surviving shareholders (a put option).
This arrangement ensures that the deceased’s estate receives fair value for the shares, while the surviving shareholders maintain control of the company without the shares passing to unintended parties. Cross option agreements are often supported by life insurance policies on each shareholder, with the insurance pay-out used to fund the purchase of shares. Overall, this agreement helps provide a smooth and financially secure transfer of ownership, reducing the risk of disputes during a difficult time.
