Small Business Essentials - Starting Up
More so than ever, owners of small businesses have tight constraints on their financial resources. Owners of small businesses must therefore decide how best to use those resources, commonly focussing on aspects such as the preparation of a business plan, rent, stock and marketing.
More so than ever, owners of small businesses have tight constraints on their financial resources.
Owners of small businesses must therefore decide how best to use those resources, commonly focussing on aspects such as the preparation of a business plan, rent, stock and marketing.
Conversely, legal advice is often seen as a costly outlay for little instant reward and so does not rank highly as a priority.
The need to carefully allocate financial resources is understandable, but successful businesses operate on a sound legal footing.
Amongst the issues which owners of small businesses should consider, are:
Be they a sole trader or a partnership, there may be benefits such as limiting liability and reducing tax bills by incorporating the business as a company.
Where there is more than one owner of the business, it will constitute a partnership. A formal partnership agreement can set out how unequal shares in a partnership are to be governed and would also help provide a means to resolve future disputes (people do not always see eye-to-eye, especially in business).
The terms of major contracts, particularly their effect on the business in future, should be considered carefully be they are entered into.
If the business will contract with customers/clients upon its own terms and conditions, these need to be enforceable if they ever need to be relied upon in future.
If a company is lucky enough to find a bank which will lend to it, its directors will doubtlessly be expected to provide the bank with personal guarantees. Such guarantees put personal assets, such as homes and savings, at risk and so advice should be taken, before they are entered into.
There is a legal requirement to provide all employees with the terms of their employment in writing. A contract of employment can also include other terms, such as restrictions upon employees moving to work for competitors or poaching customers.
Other documentation, such as disciplinary, sickness absence and grievance policies, can be vital in reducing legal costs if an employee makes a claim.
Leases are often signed without advice first being taken then regretted later. There is nearly always scope for negotiation of onerous terms, particularly as landlords are anxious not to have empty properties in the current financial climate.
Intellectual property (such as copyright, trademarks and patents) can be valuable assets of any business and so should be ensured that they are protected from infringement by others.
Similarly, businesses should ensure they are not infringing anyone else’s intellectual property rights, as this could otherwise lead to expensive arguments involving lawyers.
Commercially focussed, good quality legal advice need not drain a business’ resources and will often later be reflected upon as money well-spent.
In order to help new enterprises, Burnetts offers a free half hour of legal advice to start-up businesses in Cumbria under the Lawyers for your Business scheme.
Sam Lyon is an Associate Solicitor at Burnetts in Carlisle. For further information on setting up a business or Lawyers for your Business, contact Sam on 01228 552222.
About the author
Published: Sunday 4th October 2009
Categorised: Corporate Law