Startups Magazine-Startup pre-launch legal checklist
With so many things on your pre-launch ‘to-do list’, it’s important that you don’t take your eye off the ball when it comes to the legal aspects of your business.
As such, you may draw up a legal checklist, and hopefully, this short guide will help when it comes to compiling it.
What are the legal requirements of a startup business?
When it comes to fundamental legal requirements, of course, some elements will be sector specific. However, there are indeed some general requirements that are uniform across all industries. In this regard, you should be mindful of the following:
If you’re employing staff, it is a legal requirement to have in place Employers’ Liability Insurance.
In addition, to protect your business, you should have in place from the outset all policies of insurance which are either required or recommended.
Depending on your circumstances and industry, this may include some or all of the following insurances, amongst others:
Public Liability Insurance
Professional Indemnity Insurance
Buildings and Contents Insurance
Product Liability Insurance
Directors and Officers Insurance
Founder, Director and Shareholder Documentation
If you’re going to be trading via a limited company, you must make sure that your company is incorporated at Companies House and has been issued with a company registration number.
As part of the incorporation process, you will have to nominate your Director/s and Shareholder/s and state the number and type of shares issued to each shareholder. You will also have to decide on your ‘articles’ which is the overarching governing framework for your company, setting out which rules apply to it.
If you’re going into business with other shareholders, it is recommended that you have a Shareholder Agreement in place. To get started you can download LawBite’s free Shareholders Agreement template, which you can customise to suit your business.
Taxes and HMRC
You must ensure your business is registered correctly for all relevant taxes with HMRC.
You must register as self-employed. You will then be responsible for doing annual self-assessment returns and for paying any income tax and national insurance contributions due.
If you’re registered as a company:
You must register your company with HMRC for Corporation Tax, which is paid on the company’s annual profits.
Also, you would be responsible for paying the appropriate tax and national insurance contributions on any remuneration received by you personally (whether as a Director’s salary and/or dividends).
Depending on your turnover, it may also become necessary to register your business for value-added tax (‘VAT’).
The current annual turnover threshold for mandatory registration is £85,000, and you would then need to complete the necessary quarterly VAT returns and pay any VAT due.
It’s recommended that you engage an Accountant to help deal with your financial and tax affairs.
If you will be handling personal information in a manner that requires you to register with the Information Commissioners Office (ICO) (and are not exempt), then you must register and pay the annual fee. Failure to do this can result in a fine.
The nature of your business’s Intellectual Property Rights (IPR) will depend on the type of product or service you provide and the industry you’re in.
For example, if you have created a high-tech novel invention, you would look at patents and similar protections to maximise the exploitation of your invention.
However, if you’re launching a new fashion brand, then you will be principally looking at brand protection IPR, so you may wish to register the brand name and logo as registered trademarks, and you will need copyright protection on your clothing designs, etc.
It is wise to put in place any necessary IPR protections from the very outset to have a solid platform for growth.
Open a Bank Account
If you’re a sole trader, you should open a business bank account in your trading name. You may know this differs from a standard personal bank account, and banking fees will apply.
If you’re trading via a company, then it is the company that will open the business bank account in the company name.
Marketing and Communications
It’s also wise to prepare professional-looking letterheads, email footers, quotes, invoices and receipts, including key details such as business logo, company number, registered office and VAT number, etc., as applicable.
Terms of Business
As to your dealings with clients/customers, you must have professionally drafted Terms of Business in place.
The Terms of Business protect your business and create certainty about your product or service, clarifying each party’s rights and obligations and limiting your business liability to a fixed financial amount.
If you’re setting up a business in a regulated sector, it’s important that you have in place any necessary regulatory licences, permits or authorisations as may be required before you start trading.
Some regulated sectors in the UK are:
What do I need to do if I am employing staff or hiring freelancers?
If you’re employing staff, you should have the following points on your pre-launch checklist:
Ensure they have the right to work legally in the UK
Complete a Disclosure and Barring Service (DBS) check if required by the sector/role
Issue written contracts of employment
Complete all the PAYE requirements with HMRC so that you can deduct tax and national insurance contributions at the source
Check if you need to put your staff into a pension scheme
Put in place Employers Liability Insurance
If you’re hiring freelancers, it is advisable to be confident that they’ll be deemed legally as genuine self-employed freelancers for legal and tax reasons.
Once you have confirmed they’re genuine self-employed freelancers; you should issue them a Freelancer Contract reflecting the appropriate terms.