What is the best business structure for a small business?

It depends on your circumstances. Sole trader is simplest for low-risk businesses with modest turnover. A limited company offers liability protection and tax planning opportunities but requires more admin. Consider factors like personal liability, tax efficiency, credibility, and administrative burden when deciding.

Do I need a business bank account?

Sole traders aren't legally required to have a separate business account, but it makes record-keeping much easier. Limited companies must have a separate business bank account as the company is a distinct legal entity. Mixing personal and business finances can cause problems.

What insurance does my business need?

Employers' liability insurance is legally required if you have employees. Public liability insurance is advisable for most businesses. Professional indemnity insurance is essential for advice-giving businesses. Other types like product liability, cyber insurance, and business interruption may also be relevant depending on your activities.

When do I need to register for VAT?

You must register for VAT if your taxable turnover exceeds £90,000 in any 12-month period. You can register voluntarily below this threshold, which can be advantageous if your customers are VAT-registered businesses or if you have significant VAT on your purchases. HMRC has penalties for late registration.

How do I protect my business name?

Registering as a limited company protects the exact company name from use by other companies. For broader protection of your brand, register it as a trade mark with the Intellectual Property Office. This gives you exclusive rights to use the mark for your goods or services across the UK.

Complete Legal Guide to Starting a Business in the UK | The Solicitor Directory

Choosing Your Business Structure

The legal structure you choose affects your personal liability, tax position, and administrative requirements. The main options in the UK are sole trader, partnership, limited liability partnership (LLP), and private limited company. Each has advantages and disadvantages.

As a sole trader, you and your business are legally the same entity. This is the simplest structure with minimal admin, but you're personally liable for business debts. Partnerships are similar but with two or more people sharing profits, losses, and liability. An LLP provides partnership flexibility with limited liability for partners.

A private limited company is a separate legal entity from its owners (shareholders). Directors run the company, and shareholders' liability is limited to their investment. This structure offers credibility and tax planning opportunities but requires more administration, including filing annual accounts and confirmation statements with Companies House.

Registering Your Business

The registration requirements depend on your chosen structure. Sole traders must register for self-assessment with HMRC and notify them within three months of starting to trade. You'll need to keep records and submit a tax return each year.

Limited companies must be registered with Companies House. You can do this online, and it typically takes 24 hours. You'll need to provide details of directors, shareholders, a registered office address, and articles of association (or adopt model articles). Annual accounts and a confirmation statement must be filed each year.

You may also need to register for VAT if your taxable turnover exceeds £90,000 (or voluntarily if below), obtain relevant licences or permits depending on your industry, register as an employer if you hire staff, and consider data protection registration with the ICO if you handle personal data.

Contracts and Terms of Business

Clear contracts are essential for protecting your business. You should have written terms of business that cover your products or services, pricing and payment terms, delivery, cancellation rights, liability limitations, and dispute resolution. Different terms may be needed for business customers (B2B) and consumers (B2C).

Consumer contracts must comply with the Consumer Rights Act 2015, which gives consumers certain rights that cannot be excluded, including the right to goods of satisfactory quality and services performed with reasonable care. B2B contracts allow more flexibility, but terms must still be fair and clearly communicated.

Employment contracts are required for all employees and must include certain particulars (terms) within two months of starting work. Consider also having confidentiality agreements, intellectual property assignments, and restrictive covenants where appropriate. Having a solicitor review key contracts can prevent costly disputes later.

Protecting Your Intellectual Property

Intellectual property (IP) can be one of your most valuable business assets. The main types are trade marks (brand names, logos), patents (inventions), copyright (creative works), and design rights (product appearance). Understanding what protection you have and what you might need to register is crucial.

Trade marks should be registered to protect your brand name and logo. Registration gives you exclusive rights to use the mark for the goods or services covered and the ability to take legal action against infringers. The process takes about four months if there are no objections.

Copyright arises automatically when you create original works, but keeping records of creation dates is wise. Patents require registration and protect new inventions for up to 20 years, but the process is complex and expensive. Design registration protects the appearance of products. Consider what IP is important to your business and take steps to protect it.

Employment Law Basics

Once you employ staff, you take on significant legal obligations. Employees have extensive rights from day one, including protection from discrimination, the right to minimum wage, working time protections, and the right to a written statement of terms. After building service, additional rights like unfair dismissal protection apply.

You must operate PAYE (Pay As You Earn) to deduct income tax and National Insurance from employees' wages and pay these to HMRC. You must also provide workplace pensions under auto-enrolment rules. Keep careful records of hours worked, pay, and leave entitlement.

Employment law is complex and the consequences of getting it wrong can be serious. Having proper contracts, policies (including disciplinary and grievance procedures), and following fair procedures when issues arise is essential. An employment solicitor can help you set up compliant systems from the start.

When to Get Legal Advice

While many business tasks can be handled without legal help, getting advice at key moments can save money and problems in the long run. Consider consulting a solicitor when choosing your business structure, drafting or reviewing significant contracts, protecting intellectual property, and taking on employees.

A commercial solicitor can also help with disputes (whether you're owed money or facing a claim), regulatory compliance, buying or selling a business, and property matters like commercial leases. The cost of advice is usually modest compared to the cost of problems that could have been prevented.

When choosing a solicitor, look for someone with experience in commercial law and ideally in your sector. Many offer fixed-fee packages for common tasks like company formation or contract drafting. A good commercial solicitor becomes a trusted adviser who understands your business and can help it grow safely.