Top legal issues to tackle before you start a business

By Antonia Chitty

How to meet the legal requirements when you become self employed or set up a new biz

Working for yourself? Self-employed? Freelance? Sole Trader? Partnership? There are lots of baffling terms when you set up your own business, and that’s before you consider forming a company. If you’re setting up your own business, don’t skimp on the legalities or you could end up in a world of trouble down the line. Here are a few key issues to help your business stay legal right from the start.

Going it alone

If you start working for yourself, you’re a sole trader. You have the choice of when and where you work, and work for different customers. Like many people, it’s how I started my own business and there are lots of benefits. It’s simple to set up and you’re in control from day one. There’s more guidance on what constitutes being self-employed here, but if this sounds like you, you need to register with HMRC as self employed.

Despite the tax man’s fearsome reputation, they’re friendly folk at the HMRC. Even if you are only thinking about self-employment, give them a call in advance for one-to-one advice on what you need to do. It will save you lots of hassle later on! As a sole trader, you get all the benefit, but you also take all the risks, so you may want to look at other options too.

Picking a partnership

It can be a great idea to work with a mate, forming a business partnership. You get two sets of ideas and both your skills. You share the profits, and the losses too! Although you could simply be two sole traders working together, you’ll need to clarify how you share responsibilities.

Money can be a thorny issue, and that’s why a good partnership agreement will set out what you will each draw from the business. You could end up liable for any debt if your business partner walks out, for example. A Limited Liability Partnership offers you some protection.

I set up an online training business with a partner and we operated as a LLP. It took some effort to set up but made us clarify lots of issues from day one. It’s best to get legal advice on setting up a partnership. You must register your partnership for Self Assessment with HM Revenue and Customs too: you will need to send in a tax return for the partnership, and each partner will need to send in their own tax return too. Follow this link for more on setting up a partnership, and find lots of articles on partnership issues here.

Company conundrums?

Your third option is to trade as a company. This is more complex than working alone and you’ll need legal advice and accounts advice too. My accountant is always happy to give me advice and ensure I’m making good decisions. If you opt to work within a company structure, one plus point is that the company finances are separate from your personal finances which gives you some protection. You can choose how much to pay yourself as a salary, and how much to draw from the company as dividends.

This can have tax advantages. You need to register your company with Companies House: there’s lots of advice about what to do on their site. Find more advice on setting up a company here.

Say my name, say my name

Picking a name for your business can be harder than coming up with the business idea. You may have your own ideas, or you could canvas friends and family. Once you have a few ideas do check that there are no other businesses in the same field trading under the same or very similar names. Use a search engine and local directories to check, and don’t forget to search on registered trademarks to make sure your new business name isn’t infringing someone else’s.

If you are setting up a company your name can’t be the same as another company’s. When picking a name, you’ll want a web address and social media handles too. Check all the options are available before making a final decision: it can be galling to pick a name and find someone else has the twitter account.

Top Takeaway

If you want more help, there are business helplines across the UK: find the one for your country here. There’s more advice on the different types of business here. And there’s a great big list of more local business support here. You may need to speak to a solicitor. Some give a free half hour of advice, which also gives you a chance to see if you click. Find a solicitor here. If you only do one thing after reading the article, call the HMRC. They’re well placed to ensure that your business doesn’t end up in a red-tape tangle in years to come.

Author bio: Antonia Chitty is an award winning entrepreneur and author of books on business and enterprise. She blogs at Her latest books include Blogging: The Essential Guide (Need2Know) and Making Money Online (Hale Books).

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