Legal Requirements for Setting up a Small Business

Legal Requirements for Setting up a Small BusinessThe law in the UK places certain legal requirements on anyone that wants to set up a small business. Sole traders - that is self-employed people who work alone for themselves rather than for an employer - need to register with HMRC, for example. This means that they will have to fill in a self assessment tax return each year for any earnings they generate. Employed people don't need to do this and have their tax and National Insurance contributions deducted for them by their employer.

Small businesses are not always set up by sole traders, however. There are further legal requirements placed on any business that sets up on a limited liability basis, under a director or directors. Furthermore, different rules apply for partnerships. Therefore you should always check that any legal requirement you think that you are fulfilling as part of a small business requirement applies to the sort of set up that you have - sole trader, limited company or partnership.

Get Advice

Starting a small business should not mean that you get in a legal tangle from day one. Setting one up should be an exciting thing to do and your focus should really be on your customers. However, getting a little legal advice at an early stage can help and mean that you avoid a potential minefield later on. After all, it is usually the case that it is only when matters reach a crisis point that small business owners ask for a lawyer's assistance. Putting legal matters right late in the day is frequently much more costly than it would have been taking simple measures at the start. Sometimes a single visit to a solicitor could have helped to prevent a later legal issue in the first place. Put another way, when it comes to legal business matters, prevention is definitely better than cure.

Get Insured

There are no legal requirements for small business owners and entrepreneurs to have a public liability insurance policy, even though many people seem to think that this is the case. Nevertheless, it should be said that for any small business that interacts with the public, or conducts work in a public space, that this is an extremely good idea. If you are ever sued by a member of the public, then you may need a policy like this to keep your business operating.

Running a business may expose you to a number of risks which can be mitigated for by being adequately insured. This could relate to buildings insurance - especially if you own your own business' premises. However, you should also consider your legal requirements to cover employees in the workplace and your business assets from accidental damage or theft. Although you can expect a fee, a solicitor is able to offer independent advice on the risks your business might face and the best way to insure your enterprise against unwelcome outcomes.

Office Matters

When you choose premises for your business operations, it is important that all the terms of the lease or license are fully understood. Good questions to consider before signing a rental agreement include the sort of work which is allowed to be conducted there. Look carefully at the terms which deal with the landlord's ability to increase your rent charges. Ask yourself whether or not your business will have to shoulder ever increasing service charges and whether utility bills are included, too. It is also essential to consider legal issues surrounding planning permission, if a change of business use will be required to operate in the premises you want to.

For people who choose to run their business from home, there may also be certain legal restrictions. For small business owners who rent their home, their tenancy agreement may mean that they have to seek their landlord's permission to work from their residential address. For homeowners, it may be possible to incorporate some of the costs of running a business from home as part of their tax return, but certain rules from HMRC are likely to apply, depending how much space is used and how much business is conducted from home. You may need to get an accountant to help you work out what is allowable under the UK tax law and what is not.

Employing People

If your business needs to hire people to grow, then you need to think about all the legal requirements that are a part of employment law. This is a complex area and one that is liable to change from time to time. Many employment disagreements are caused by badly worded contracts or dismissal policies, so it is important to have these written well and redrafted in legal terms. Remember that when hiring people the UK law requires you to not discriminate between people in terms of their gender, race and so on. When somebody has been taken on by small business, it becomes the employer's legal responsibility to deal with their tax for them.

Further Reading

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