The legal requirements of starting a new business


Being your own boss sounds appealing. You can choose when and how you work and get all the rewards for your efforts. However, setting up a business is complex, and the details of doing it effectively can be intimidating. The legal requirements are manageable for those seeking to work as a sole trader with limited liability. The challenge comes when you begin to employ your team and must comply with business law.

While it sounds like starting a business is more complex than you imagined, don’t let the fear of these requirements put you off from trying your new venture. Here we will explore the steps you must take and feel reassured that you are doing the right thing.


Register your business

When you register your business, you make it legal to begin trading. The process is relatively simple and is a matter of choosing the type of business. Knowing what this choice is depends on your approach and will either be a partnership, limited company or self-employed. Getting advice at this point can be helpful when it comes to filling in your tax return.

As a freelancer, the rules are different. You do not need to register as a business with Company House, but you do need to register as self-employed with HMRC. You can later register as a limited company if it makes more sense to your business. There’s no time limit, and you can register your business when appropriate. You will likely register when you hire staff and want to be listed on Company House at least six months before your first tax filing.

In order to register your business, bear in mind you will need to have a name for it, so this is an opportunity to start thinking about branding and how you will represent your business as well. Partly this will depend on what industry you are thinking of getting into – naming a financial services company will be pretty different from naming a cafe, for instance – and partly it’s about making sure it is unique, as that is a legal requirement. As long as you make sure of that, it’s going to help a lot.


Registering your business is an important first step.


Get the right insurance.

It would be best if you protect yourself and your business. If something goes wrong, you want the peace of mind to know you can make a claim. The most important if hiring people is Employer’s Liability insurance. This insurance is a legal requirement for businesses hiring people, even if these are members of your family. It is a matter of protecting you should there be a need to pay compensation.

Offering a service to the public opens you to greater liability. Therefore, you will need professional indemnity insurance so that insurance can be paid to customers if something happens. It is vital to have this insurance in place before offering any service for money. If you are having an issue with your insurance, make sure you hire an insurance claim denial lawyer. Before hiring any professional, do your due diligence and vet them thoroughly.


Business insurance protects you against the unexpected.


Hire your team

Legally, recruitment is complex. You have to be sure that you are not discriminating based on age, ethnicity, disability and other factors. Even at the point of issuing your job description, you need to be open to employing the person best for the role, no matter who they are. However, this is only the first stage, and the legal requirements run through the whole process.

One of the trickiest parts of recruitment is the interview. How you ask the questions can be discriminatory if you are not careful. For instance, asking a woman if she plans to have a family is perceived as discriminatory.


Recruitment can be a tricky step.


Being aware of data laws

UK GDPR (General Data Protection Regulation) is a law that matters to businesses of all sizes. Getting your GDPR wrong can damage your business and leave you open to negative publicity.

First, you need to have a Privacy Policy in place that is available to your team and your customers. You will then need to consider how you store your data and who gets access to this data. From your customers’ email addresses and other contact details to the employment records of your team, these need to be secure.



Seeking legal advice

You do not need to visit a solicitor to set up your business, as there is no law to suggest you must use their services. When starting as a freelancer, there is little need for legal advice as you only need to register with the HMRC and ensure your self-assessment is filed before the deadline.

If you are setting up a limited company with only one shareholder, there is a straightforward form to fill out online. There are also company formation agencies that can support you and have you set up quickly. Be sure to know the details of the shareholder, the registered office for the business and your business name.

Having more than one shareholder comes with complexities. At this point, you will want the support of a solicitor to ensure your registration with Company House is accurately completed.

While you don’t need to hire a solicitor for most starting, there is something to gain from a brief consultation. If you start knowing what is required from you, you will likely avoid future problems.





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